Ease of Doing Business Ranking

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    • Recently, the Finance Minister released the assessment report of the States and Union Territories under Business Reforms Action Plan (BRAP), 2020.

    About BRAP 2020 

     

    • Host: The Department for Promotion of Industry and Internal Trade is the institutional anchor for the Ease of Doing Business program.
    • History: The DPIIT since 2014 has been assessing states/UTs based on their performance in the implementation of prescribed reforms in the BRAP exercise.
      • So far four editions of the assessment have been released, and the latest edition was for the 2020 assessment.
    • The new categorisation method was used as the difference between various states/UTs was so little that it did not make sense to rank them.
    • Aim: The broader aim of the exercise is to boost investor confidence, foster a business-friendly climate and augment the ease of doing business across the country.
      • It would be done by introducing an element of healthy competition through a system of assessing states based on their performance in the implementation of Business Reforms Action Plan (BRAP).
    • BRAP 2020 includes 301 reform points covering 15 business regulatory areas, such as access to information, single window system, and labour and land administration. 
      • Sectoral reforms with 72 action points spread across nine sectors like trade licence, healthcare, legal metrology, and cinema halls were introduced for the first time to expand the scope of the reform agenda.
    • Purpose of this BRAP exercise is to infuse a culture of learning from each other’s best practices and improve upon the business climate in each State/UT with a unified objective for India to emerge as the most favoured investment destination across the globe.

    Major findings of the report

    • Top achievers category:
      • Andhra Pradesh, Gujarat and Telangana are among the seven states categorised as top achievers in the ranking of states and Union Territories.
      • Haryana, Karnataka, Punjab and Tamil Nadu are the other states on the list of top achievers.
    • Achievers category:
      • Himachal Pradesh, Madhya Pradesh, Maharashtra, Odisha, Uttarakhand and Uttar Pradesh have been categorised as Achievers in the ranking.
    • Aspires category:
      • The Aspires category too includes seven states, including Assam, Kerala and Goa.
      • Other states in this section are Chhattisgarh, Jharkhand, Kerala, Rajasthan and West Bengal.
    • Emerging business ecosystems:
      • In the category of emerging business ecosystems, there are 11 states and UTs, including Delhi, Puducherry and Tripura.
      • Andaman and Nicobar, Bihar, Chandigarh, Daman and Diu, Dadra and Nagar Haveli, Jammu and Kashmir, Manipur, Meghalaya, Nagaland, and Tripura are the other states and UTs in this section.
    • State single window clearance systems:
      • 30 states and UTs have developed their state single window clearance systems, while six are developing them.
    • National single window:
      • 14 states have boarded the national single window.
    • Central inspection system:
      • 20 states and UTS have developed a central inspection system.

    Challenges of doing business in India

    • Starting a Business: The cost of starting a business in India is astronomical, and the procedures involved can be daunting without local knowledge.
    • Dealing with Construction Permits: Construction permits are also a costly pursuit, involving 34 procedures and taking 196 days.
    • Getting Electricity: The cost of getting electricity is relatively cheap in comparison to the rest of South Asia, but the number of procedures involved can be rather daunting.
    • Registering Property: Registering a property requires quite a bit of legwork and can also incur substantial charges.
    • Protecting Investors and enforcing contracts: India ranks as one of the worst countries in the world for the ability to enforce a contract, taking an average of 1,420 days.
    • Paying Taxes: The headline corporation tax rate stands at 30%, but companies can also incur charges in the form of a central sales tax, dividend tax, property tax, fuel tax, vehicle tax, VAT and excise duty.
    • Resolving Insolvency: It takes 4.3 years to resolve insolvency in India, far longer than the South Asian and OECD average.

    Way Forward/ Suggestions 

    • The entrepreneurial ecosystem in India is in progression mode: Consequently, further moderation, ease of compliance, easier fund accessibility, recognition, and rewarding programs are required from GoI to ensure a superior startup ecosystem to help India reach its long-term goals.
    • Simplification and rationalisation of compliances: This exercise must be directed at simplification and rationalisation of compliances, decriminalisation of minor civil offences, and removal of redundant laws to ensure breathing space for businesses to set their foot in the market and compete with market giants.
    • Digital infrastructure: India is required to enhance its digital infrastructure to further strengthen its Business ecosystem.
    • Integrated programs: GoI should come up with integrated programs to recognize and reward outstanding Businesses that are contributing to economic dynamism by spurring innovation.  

    Ease of doing business index

    • The ease of doing business index is released by the World Bank Group. The World Bank has discontinued the practice of issuing ‘Doing Business report’ following an investigation reported “data irregularities”.
    • The report was above all a benchmark study of regulation.
    • A nation’s ranking on the index was based on an average of 10 sub indices:
      • Starting a business – Procedures, time, cost, and minimum capital to open a new business
      • Dealing with construction permits – Procedures, time, and cost to build a warehouse
      • Getting electricity – procedures, time, and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse
      • Registering property – Procedures, time, and cost to register commercial real estate
      • Getting credit – Strength of legal rights index, depth of credit information index
      • Protecting investors – Indices on the extent of disclosure, the extent of director liability, and ease of shareholder suits
      • Paying taxes – Number of taxes paid, hours per year spent preparing tax returns, and total tax payable as a share of gross profit
      • Trading across borders – Number of documents, cost, and time necessary to export and import
      • Enforcing contracts – Procedures, time, and cost to enforce a debt contract
      • Resolving insolvency – The time, cost, and recovery rate (%) under a bankruptcy proceeding.

    Source: BS