How easy is it to do business in India?
The World Bank 2020 Ease of Doing Business Report ranks India at the 63rd position among 190 countries evaluated. In 2019, India ranked 77. Now, compare this with India’s rank of 134 in 2014, the year PM Modi led the NDA into power.
The transformation has been remarkable, and the credit must go to the government for undertaking the challenge of improving the ease of starting and doing business in India. However, India has to do a lot more if it wants to accelerate foreign investment in India and make the Make in India initiative a more significant success.
The World Bank Ease of Doing Business Index ranks countries on the following ten parameters:
- Starting a Business
- Dealing with Construction Permits
- Getting Electricity
- Registering Property
- Getting Credit
- Protecting Minority Investors
- Paying Taxes
- Trading across Borders
- Enforcing Contracts
- Resolving Insolvency
Of the above, India made a significant improvement in Construction Permits, where it jumped in rank from the 184 in 2014 to 52 in 2018. Similarly, in Getting Electricity, India climbed from 137 in 2014 to 24 in 2018.
Other areas where India stood out in the 2020 Report is Protecting Minority Investors, where it ranked 7th. The critical area of Getting credit has India ranked 22nd.
What are the new rules of the government for improving the ease of doing business?
Most initiatives for reforms pertain to the jurisdiction of Delhi and Mumbai. India must expand the reforms process to other states at the earliest.
Starting a new business in India
Earlier, new companies had to fill out a five-page form to reserve a company name. It is now a simple task of filling out online three-fields.
New companies can now fill one single form – SPIC, instead of submitting separate forms like Permanent Account Number (PAN), Tax Deduction & Collection Account Number (TAN), and Director Identification Number (DIN).
Previously, a new company had to physically visit and apply to register for Employee State Insurance Corporation (ESIC) and Employee Provident Fund Organization (EPFO). Both stands merged into one single online form – Shram Suvidha.
The government has done away with the need for an Inspector visit before registering under the Shops and Establishment Act in Delhi and Mumbai.
The Companies Act does not make it mandatory to have a common company seal.
Receiving Construction Permits
The cost of getting construction permits stands reduced from 23.2 per cent to 5.4 per cent of the per capita income. The time to receive construction permits in Mumbai is down from 128.5 days to 99 days. In Delhi, the period is down from 157.5 days to 91 days.
Builders and developers can use their digital signatures and get their building plans scrutinized online from Municipal Corporation of Delhi and Greater Mumbai, respectively, by filling out the Common Application Form (CAF).
Trading across Borders
Import and export documentation is now reduced to three and can be submitted online through the Indian Customs Single Window Project.
Two measures have further eased import and export; Electronic self-sealing of containers at the factory; improved transparency through the introduction of a computerized risk management system.
The government has set up the Commercial Courts and Appellate Division under the high courts of Delhi and Mumbai. New measures include E-filing of cases in Delhi and Mumbai; access to relevant Case data through the National Judicial Data Grid (NJDG); the automated system for allocation of cases to judges in Delhi and Mumbai.
Ease in Getting Credits
Getting credit depends on asset value. Unscrupulous businesspersons often abuse the system by overvaluing assets. The Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI), the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) have been amended to reclassify assets and made it difficult to abuse the system.
Getting an electricity connection for business is now reduced to seven days where no Right of Way (RoW) is required, and to 15 days where it is required. Only two online documents need to be submitted, while the total number of procedures to be cleared down to three in Delhi and four in Mumbai.
In Delhi and Mumbai, digitization of land records has increased transparency and automated the land mutation process post online registration of land. Revenue Courts in both cities can easily access statistics of land records.
Corporate Insolvency laws have been amended to facilitate faster redressal of cases, under the Insolvency and Bankruptcy Code of 2016. Mid-sized companies can resolve insolvency cases within 90 days under the fast track Corporate Insolvency Resolution Process (CIRP).
Introduction of the Goods and Services Tax (GST) in 2017 is a significant reform as it subsumes eight central taxes and nine state taxes.
The big-ticket reform this year is the reduction in corporate tax from 30 per cent to 25 per cent. The move will accelerate FDI in India.
With Effect from 1st October 2019, domestic manufacturing companies will come under the reduced 15 per cent tax rate (17.01 per cent including surcharge and cess).
Tax returns filing time and process has been substantially reduced under the online module of the Employees State Insurance Corporation (ESIC).
If India is to climb further on the World Bank’s Ease of Doing Business Index, it must push further to accelerate reforms in all the above areas.