DATA STORIES

Doing Business in India – Made Easy, Efficient and Effective

Doing Business in India

For many centuries, the Indian sub-continent was the preferred destination for traders and businessmen. However, post colonization by the East India Company, our economy dried up and after 1947, India was left to the mercy of pseudo-socialist politicians who believed that the Government should be in the business of doing business. This not only discouraged entrepreneurs, but it also cultivated multiple generations of citizens, who were over reliant on Government for jobs and social amenities.

Post-liberalization of Indian economy, it became clear that to attract foreign investment, India had to work on structural reforms and processes. Right from starting a business to staying in the business and exiting – the system was plagued with delays in clearance, redundant procedures and permissions from multiple agencies, which increased the cost of doing business, and decreased investor attractiveness. When India was ranked 142 out of 190 countries in 2014 in the World Bank’s Ease of Doing Business Index, it became obvious that decades of policy paralysis has taken its toll on the entrepreneurial and business environment.

Then, India turned to Gujarat and under the administration of Narendra Modi led BJP, for lessons on ways to keep the business ecosystem buoyant and efficient. Subsequently, when he assumed office, one of his key concerns was to address the issues faced by upcoming and established, domestic and international business players. With due thrust on start-ups and reforms such as single-window, digitization of land records, grievance cells, and GST, the Prime Minister has repeatedly stressed, that it is the mandate of the Government to enable businesses to grow, and provide adequate support and resources.

As per data from the World Bank, it is evident that there has been a transformative impact in the realm of business activities.

I. Starting a Business:
  • Number of procedures to legally start and formally operate a company fell from 14.5 in 2014 to 10 days in 2019.
  • Time required to complete procedures (calendar days) fell from 32.7 days in 2014 to 16.5 days in 2019.

II. Dealing with Construction Permits:
  • Number of procedures to legally build a warehouse fell from 32.5 in 2014 to 17.9 in 2019.
  • Time required to complete procedures (in calendar days) fell from 180.4 days in 2014) to 94.8 days in 2019.
  • Cost required to complete the required procedures fell from 33% in 2014 to 5.4% in 2019, which is the consequence of simplified and optimized number of procedures.

III. Getting Electricity:
  • Number of procedures to obtain an electricity connection fell from 6 days in 2014 to 3.5 days in 2019.
  • Time required to complete the required procedures (in calendar days) fell from 115.6 days in 2014 to 55 days in 2019.
  • Cost required to complete procedures (as a % of the economy’s income per capita) fell from 248.3 in 2014 to 29.5 in 2019.

IV. Getting Credit:

Access to credit, either for working capital or asset creation, is a critical factor for businesses to sustain or expand. Credit bureaus which are responsible for maintaining credit history of borrowers play a decisive role in increasing credit penetration.

  • Against this backdrop, it is notable that Credit bureau coverage (% of adults) i.e. number of individuals and firms listed in the largest credit bureau as percentage of adult population increased from 19.8 to 55.9. This also indicates increase in disclosures and higher formalization of the economy.

V. Paying Taxes:

Goods and Services Tax (GST) was launched in 2017. Over the past one year, the system has stabilized and tax payers have become accustomed to the new tax regime.

  • Tax payments for a manufacturing company in 2017 (number per year adjusted for electronic and joint filing and payment) fell from 41.1 in 2014 to 11.9 in 2019.
  • Time (hours per year) has increased by 9%, which is a consequence of the new tax structure and changes that have been promptly made by the GST Council, based on feedback received from industry and tax payers.

VI. Resolving Insolvency:

Recovery rate (cents on the dollar) increased by 4.3%. India’s score on overall strength of insolvency framework improved significantly, as a consequence of the Insolvency and Bankruptcy Code, 2016.

Areas of work include registering a property, where procedures, time and cost (% of property value) have seen a marginal dip. One of the reasons for this decline is the crackdown on underhand deals, through increased digitization and reduced human intervention.

In response to the critics who drub World Bank’s Ease of Doing Business Rankings as a result of surveys limited to Mumbai and Delhi, it would be interesting to know that the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India undertakes measures to rationalize the regulatory and compliance processes across every State through its Business Reforms Action Plan. This not only promotes competitive and cooperative federalism, it also serves as a repository for the best practices.

Conclusion

The World Bank has identified India as one of the 10 economies with significant improvement in doing business scenario. To usher an era of ease of living, we need to begin from initiating reforms that simplify doing business in India, attract investors, and create employment. The incumbent government is committed to providing resources and support to entrepreneurs, with the intention to bring a fundamental shift in the perception of India as a business destination and a burgeoning market.