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Recently, the World Bank has published the rankings for 190 economies in terms of their ease of doing business (EODB) at http://www.doingbusiness.org/rankings which are taken upto to June 2017. India has been ranked at 100 in terms of its EODB, thereby moving into the top 100 of the World Bank’s EODB global rankings from its 130th position last year.

The overall ranking of the economies in terms of their EODB as well as category-wise ranking ranges from 1–190. A high ease of doing business ranking implies that the regulatory environment is more favorable and beneficial to the starting and operation of a local entity.

The following table indicates the overall as well as category-wise Doing Business (DB) Ranking of India by the World Bank for 2018:

SN TOPICS DB 2018 RANK
1. Overall 100

 

2. Starting a Business 156
3. Dealing with Construction Permits 181
4. Getting Electricity 29
5. Registering Property 154
6. Getting Credit 29
7. Protecting Minority Investors 4
8. Paying Taxes 119
9. Trading across Borders 146
10. Enforcing Contracts 164
11. Resolving Insolvency 103

 

Note: = Doing Business reform making it easier to do business.

These rankings are determined by sorting the aggregate distance to frontier (DTF) scores on 10 topics. An economy’s DTF is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. These DTF scores are taken as a basis to determine the overall ranking of an economy in terms of its ease of doing business.

The following are the DTF scores for Doing Business in India in 2018 as compared to that of in 2017 in various categories:

 

SN TOPICS DB 2018 DTF DB 2017 DTF Change in DTF (% points)
1. Overall 60.76

 

56.05

 

4.71
2. Starting a Business 75.40 73.69 1.71
3. Dealing with Construction Permits 38.80 36.17 2.63
4. Getting Electricity 85.21 85.17 0.04
5. Registering Property 47.08 46.83 0.25
6. Getting Credit 75.00 65.00 10.00
7. Protecting Minority Investors 80.00 76.67 3.33
8. Paying Taxes 66.06 47.67 18.39
9. Trading across Borders 58.56 57.61 0.95
10. Enforcing Contracts 40.76 38.90 1.86
11. Resolving Insolvency 40.75 32.75 8.00

 

According to the World Bank, the Government of India has initiated the following reforms under each category to make it easier to do business in India:

  • Starting a Business:

India has facilitated fast business set up by improving the online application system and allowing a common online application form for the Permanent Account Number (PAN) and the Tax Account Number (TAN).

  • Dealing with Construction Permits

India has implemented an online system of dealing with construction permits which may reduce the instances of lengthy and time taking procedures to obtain a building permit and has also streamlined the process at the Municipality of New Delhi and Municipality of Greater Mumbai.

  • Getting Electricity

The Government of India had in 2016 introduced an online application system for obtaining new commercial electricity connections, the Central Electricity Authority (CEA) has waived off the Electrical Inspector’s approval for internal wiring and installation, has made available to public the data pertaining to supply of electricity connections across Delhi and Mumbai, which may make it easier and faster to get electricity. The cities of Delhi and Mumbai have incorporated these reforms.

  • Getting Credit and Resolving Insolvency

India had introduced a new law, namely, the Insolvency and Bankruptcy Code 2016, which continues to focus on creditor driven insolvency resolution process. The creditors have the power to decide whether the debtor’s business is feasible to continue and the options for its revival, etc. Moreover, after the payment of the insolvency resolution process costs and the liquidation costs, the claims of secured creditors and the workmen dues stand as a priority to all other claims. These reforms may strengthen the access to credit in India.

Moreover, the Code has provided for time bound settlement of insolvency (180 days) by the National Company law Tribunal (NCLT), easier revival process or liquidation, participation of creditor in insolvency proceedings, etc which makes it easier for creditors, financial institutions and banks to deal with non-performing assets (NPAs) and to be aware of serial defaulters.

  • Protecting Minority Investors

The Companies Act 2013 has taken into consideration the importance of protection of minority investors. The independent directors are responsible for safeguard the interests of minority shareholders, for balancing the conflict of interests of all stakeholders, etc. If the investors are protected, the company may be able to raise the capital needed to grow, innovate, diversify and compete, otherwise, banks may become the only source of finance.

  • Paying Taxes

India has eased the tax compliance on businesses by providing an online platform for electronic payment of the Employees’ Provident Fund (EPF) and has introduced certain other measures to ease corporate income tax compliance.

  • Trading across Borders

The reduced cross border trade compliance costs in Delhi and Mumbai achieved by eliminating merchant overtime fees (which were to be paid by an assessee for availing the services of Central Excise Officers after the official hours) and the increased use of electronic platforms may help in reducing the time taken to comply with the import and export regulations.

  • Enforcing Contracts

The ‘Enforcing Contracts’ indicator measures the time and cost to resolve a standardized commercial dispute which can be determined from a comprehensive database of pending and disposed cases in the district courts of the country available at http://njdg.ecourts.gov.in. The computerization of court records across various states of the country has made it possible to collect and organize such data online.

Therefore, the Government of India has been introducing and improving several measures to attract foreign investments and facilitate ease of doing business in India.

 

Harini Daliparthy

Legal Associate

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