Ease of doing business: Here's how India can improve its global ranking

Process of starting a business remains cumbersome for local entrepreneurs in Mumbai

Starting a business: Rank 153 out of 190

India has reduced the time needed to register a new business to 30 days now -- a great leap from where it stood 15 years ago when it took 127 days. However, the process still remains cumbersome for local entrepreneurs in Mumbai, as they still need to go through as many as 12 procedural measures to begin their business in the financial capital of the country.

The number of steps involved in beginning operations in Mumbai is, in fact, significantly more than what one can witness in the OECD high-income economies, where businesses need to go through no more than five procedures on an average.

Why does formal business registration matter?

In the 115 economies covered by both the Doing Business report and the World Bank’s Entrepreneurship Database, an estimated 2 million limited liability companies were newly registered in 2016 alone. Data from 2012 show that if these economies had followed best practices, their local entrepreneurs would have saved 45.4 million days spent in satisfying bureaucratic requirements. The valuable time lost in this regard could have been better employed by focusing on growth, productivity and innovation.

Dealing in construction: Rank 181 out of 186

Another major area of concern for India is related to construction permits. India's ranking showed a marginal improvement as it moved up four places to rank 181st, from 185th last year, as reflected in the 2018 report. The improvement in India's ranking on this front came on the back of reforms initiated in Delhi and Mumbai to reduce the number of procedures and time required to obtain a building permit by introducing an online system for permits. 

However, India needs to work out more broad-based reforms to further improve its standing on the Ease of Doing Business index.

Why do construction norms matter?

Good construction regulation matters primarily to ensure public safety. However, it is also important for maintaining the health of the building sector as well as the overall economy. According to a recent study, the construction industry accounts on average for 6.5 per cent of gross domestic product (GDP) in the OECD economy.

Registering Property: Rank 138 out of 154

India's ranking on this indicator slipped to 154 from 138 in 2017, the report stated. The dip is indicative of an urgent need to improve the country’s standing on the issue of property registration.

Why property registration matters?

Registered property rights are necessary to support investment, productivity and growth. Cadastres or surveys, together with land registries, are tools used around the world to map, prove and secure property, besides being put to for determining use rights. Land and buildings account for up to three quarters of the total wealth in most economies, thereby making the need for having an up-to-date land information system all the more urgent.

Paying Taxes: Rank 119 out of 190

In paying taxes, India (rank 119th) was ahead of China, which ranked 130th. However, this is one area where India needs to improve further.

Why do tax rates and tax determination matter? 

Oliver Wendell Holmes, a former US Supreme Court justice, said: “Taxes are what we pay for a civilised society.” Governments need sustainable funding for social programmes and public investments to promote economic growth and development. Programmes providing health, education, infrastructure and other amenities are important to achieve a common goal of a prosperous, functional and orderly society. And they require that governments raise revenues. Taxation not only provides funds for public goods and services, but it is also a key ingredient of the social contract between citizens and the State, thereby, acting as a key to building an effective government.

Trading across borders: Rank 146

India slid slightly on trading across borders. Finance Minister Arun Jaitley said the standing on this front would improve next year since the report did not factor in changes made to the Companies Act.

Why it matters?

Access to international markets plays an important role in the economic development of a country. While tariffs continue to be the most widely used policy instruments to promote or restrict trade, their relative importance has declined over time.  Other factors, namely trade-related transaction costs have taken precedence. Logistics and freight expenses, customs administrative fees, and border costs have become more noticeable for small traders. While the significance of small and medium-sized enterprises (SMEs) in the overall economy has been recognised, SMEs have been largely absent from trade debates until recently.

Enforcing contracts: Rank 164

Efficient contract enforcement is essential to economic development and sustained growth. Economic and social progress cannot be achieved without the respect for the rule of law and effective protection of rights-- both of which require a well-functioning judiciary that resolves cases in a reasonable time and is predictable and accessible to the public. Economies with a more efficient judiciary, in which courts can effectively enforce contractual obligations, have more developed credit markets and a higher level of overall development.