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India’s Historic Jump in Doing Business Rankings

World Bank’s Doing Business Report, 2018 released on Tuesday 31 October, 2017 recognized India as one of the top five reformers in this year’s assessment. India has jumped a massive 30 places to occupy the 100th position in World Bank assessment of 190 nations, registering its highest ever increase in Ease of Doing Business Ranking this year. It was ranked 142 in 2014, 131 in 2015 and 130 in 2016; and is among the 10 economies to have improved the most, alongside El Salvador, Malawi, Nigeria and Thailand. New Zealand tops the World Bank index this year and Singapore is number 2, with Denmark placing third. Somalia is last. Pakistan is at 147 and Bangladesh is at 177. India is closing the gap with China which continues to be ranked at 78 for the second year. This 190-country index is an influential barometer of competitiveness among countries that likely help businesses make investment decisions. Sharing details of the report, Finance Minister Arun Jaitley said that, “The Prime Minister said we should be in the top 50. The fact that in three years we have jumped from 142 to 100, I believe this is doable.”

India improved its ranking in 6 out of the 10 ‘Parameters’ used to measure the ease of doing business in: ‘Getting Credit’ with this year’s rank at 29 from 44 last year, ‘Dealing with Construction Permits’ at 181 from 185, ‘Protecting Minority Investors’ at 4 from 13, ‘Enforcing Contracts’ at 164 from 172, ‘Paying Taxes’ at 119 from 172 and ‘Resolving Insolvency’ at 103 from 136. India, however, slipped its ranking in: ‘Starting a Business’ at 156 from 155, ‘Trading across Borders’ at 146 from 143, ‘Getting an Electricity Connection’ at 29 from 26 and ‘Registering Property’ at 154 from 138.

World Bank’s ranking acknowledge India’s reform trajectory under Prime Minister, Narendra Modi due to the part of measures the government has pushed to boost investment and jobs that would help absorb a million people who join the workforce every month. Prime Minister hailing India’s historic jump expressed his response as under:

  • “It is the outcome of the all-round & multi-sector reform push of Team India,
  • Easier business environment is leading to historic opportunities for our entrepreneurs, particularly MSME sector & bringing more prosperity,
  • Over the last 3 years we have seen a spirit of positive competition among states towards making business easier. This has been beneficial.
  • It has never been easier to do business in India. India welcomes the world to explore economic opportunities our nation has to offer!
  • Guided by the Mantra of ‘Reform, Perform & Transform’ we are determined to further improve our rankings & scale greater economic growth.”

Doing business in India became much easier over the past one year because of a raft of policy reforms, as the annual World Bank index reflects, in what is possibly a shot in the arm for Prime Minister Narendra Modi’s efforts to win big-ticket investments.

India’s improved ranking in the World Bank ease of doing business index is a boost for the government which has had to defend its economic policies amid criticism over the GDP growth rate hitting a three-year low in the April to June quarter of 2017.

According to Annette Dixon, World Bank’s vice president for South Asia, “Today’s result is a very clear signal from India to the rest of the world that not only has the country been ready and open for business, as it has been for many decades, it is now competing as the preferred place to do business globally.” “India’s performance is not based on efforts of just one year but consistent efforts made over the last three years to continuously improve the regulatory environment of doing business.” “It is the result of a number of reforms that the government has undertaken that India is becoming a preferred destination to do business.”

According to Amitabh Kant CEO NITI Aayog, India worked in close partnership with the World Bank to improve its position and instead of criticising the ranking method, the government decided to carry out critical structural reforms and ranked states. Prime Minister Narendra Modi was very clear right from the first meeting with NITI Aayog that doing business in India must become very simple and easy. He pointed out that India was a very complex place to carry out business and that needed to change. Now India has improved its ranking in 6 out of 10 indicators. But in ‘distance to the frontier’ (DTF) – an absolute measure of progress towards the best practice, India has improved in 9 out of 10 indicators. DTF score benchmarks economies with respect to regulatory best practice; India scored 60.76 against 56.05 last year, indicating that “the country is continuing its steady shift towards best practice in business regulation”. This shows that India’s reforms are contributing to closing the gap with the best in the world in almost all indicators. In fact, India ranks in the top 30 in protecting minority investors, getting credit and getting electricity. It has made an all-round progress. A jump of 30 ranks is a quantum leap. It shows that what has been done is actually getting implemented. And what the prime minister had promised, of rolling the red carpet (to businesses), has actually happened.

In ease of doing business for states, World Bank has done the analysis. In the first year, Gujarat was at number one; the next year, Telangana and Andhra Pradesh beat Gujarat. In fact, eastern states of Jharkhand and Chhattisgarh did very well. If the eastern part of the country does well, India does well.

The real reason is the real structural reforms undertaken by the government. Bankruptcy code, easier exit, real estate regulation authority, push for digitisation and push for no human intervention across sectors, among others, have been the big reforms undertaken that were never envisaged or performed.

Finance minister Arun Jaitley while addressing a press conference on Tuesday evening said, “Indirect tax reform (Goods and Services Tax) had become law by June, but was implemented from July. We will get credit for it in future rankings,” and added, “Evaluation for the ease of doing business ranking is very tough. The ranking does not reflect the reform measures unless the outcome is visible on the ground.”

Junaid Ahmad, World Bank country director in India said effective implementation of GST and bankruptcy law may improve India’s ranking significantly over the coming years.

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