NEW DELHI: India has moved up only one rank on the World Bank’s ease of doing business ranking this year, a disappointing result for the Narendra Modi government that made several initiatives and has set itself a target to break into the top 50.
India is ranked 130 out of 190 countries in World Bank Group’s annual report on the ease of doing business, ‘Doing Business 2017: Equal Opportunity for All’, released on Tuesday. Even the one rank improvement is because India had been downgraded in the 2016 edition to 131from 130 earlier.
The World Bank report, however, recognised the concerted efforts made by India, and set aside a special section “India has embarked on an ambitious reform path” to list the developments.
“The country has embarked on a fast-paced reform path, and the Doing Business 2017 report acknowledges a number of substantial improvements,” the report said, mentioning electricity connections to businesses, paying taxes, electronic system for paying employee state insurance contributions, electronic filing of integrated customs declarations, the Companies (Amendment) Act, passage of the commercial courts and the Insolvency and Bankruptcy Code.
In the ranking, India has made a substantial improvement in some areas such as electricity connection, but slippage in other areas, including payment of taxes and enforcing contracts, prevented improvement on the rankings that is followed widely by global investors.
Another factor was that several countries worked on improving the business environment. According to the World Bank report, a record 137 economies around the world have adopted key reforms that make it easier to start and operate small and medium-sized businesses.
Officials said the government has made focused effort to address areas where the country was doing poorly, and is hopeful that these will be recognised in the coming years. “We are engaging continuously and closely with the World Bank…Many of our reforms have not been recognised by them. However in many areas we are getting closer to best practices,” said Ramesh Abhishek, secretary at the Department of Industrial Policy and Promotion (DIPP).
On the parameter of getting electricity, India has improved to 26th spot from 70th last year. However, the country fell several ranks in parameters such as payment of taxes, trading across borders, and enforcing contracts.
Officials said the government has made important reforms in all these areas, but many of the reforms after the May cutoff date for the rankings.
Besides, World Bank recognises a reform only after taking a feedback of users and some of the government measures will take time to filter through.
It has not recognised the introduction of INC-29 for company incorporation because less than 50% entities have used the system.
DIPP has said that online filing and payment of returns at the Employee Provident Fund Organisation has been implemented, but it too was not considered by the World Bank. Online registration for EPFO has also not been given credence, according to DIPP, even after it shared “logs and voluminous evidence” of the same. “It is disappointing that many achievements have not been covered by the report due to methodological issues. We are hopeful that they will take into account all implemented reforms in future reports,” Abhishek said.
NO CHANGE IN SOME PARAMETERS
India has maintained status quo in its ranks in parameters of starting a business and registering property with 155 and 138 position, respectively.
Prime Minister Narendra Modi had set a target for India to enter the top 50 in ease of doing business ranking in three years after breaking into top 100 this year.
The government is now banking on the implementation of the Insolvency and Bankruptcy code by December end to improve its rank.
It is also hoping that the goods and services tax will help make significant improvement in its rank next year.
With the introduction of the SPICE form – Simplified Performa for Incorporation of Companies Electronically — by the corporate affairs ministry this year, the government is also hoping to up its rank on starting business parameter. DIPP has decided to put in place institutional mechanisms and appoint observers to regularly seek feedback from the user. It will appoint external agencies to hold stakeholder consultations and monitor the implementation of the reforms.
“The rankings are incompletely reflective of the significant transformation in the overall business environment in key areas such as openness to FDI, online procedures, MSME facilitation and so on,” CII said in a statement.
According to the World Bank report, developing countries carried out more than 75% of the 283 reforms in the past year, with Sub-Saharan Africa accounting for over one-quarter of all reforms.
New Zealand topped the World Bank ranking for ease of doing business, followed by Singapore, Denmark, Hong Kong, South Korea, Norway, UK, US, Sweden, and former Yugoslav Republic of Macedonia. Pakistan made it to the world’s top 10 improvers, based on reforms undertaken. The list is topped by Brunei Darussalam, followed by Kazakhstan, Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, United Arab Emirates, and Bahrain.