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India fails to move up World Bank's Doing Business Report

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26 October 2016

India, which lost one rank in the World Bank's annual Doing Business ranking survey 2016 to 131 in the revised list, is back in the 130th rank in the Doing Business ranking survey 2017, highlighting a gap between policy and action.

The World Bank had last year lowered India's ranking to 131 in a revised list from 130 announced earlier.

Out of 10 parameters, India's ranking this year improved in two, remained unchanged in three and worsened in five. The government was expecting at least a 10-spot jump on the back of several ease of doing business measures taken in the past two years.

A government statement today said, the World Bank's annual Doing Business 2017 report released today recognizes India's achievements in implementing reforms in four of its ten indicators - Trading Across Borders, Getting Electricity, Enforcing Contracts and Paying Taxes. This is the first time in its history that India has been recognised for improvement in four indicators.
 
The Doing Business report ranks countries on the basis of `Distance to Frontier', an absolute score that measures the gap between India and the global best practice. India's absolute score improved from 53.93 to 55.27 in the previous year. This is the first time in history that India has improved its absolute score in two consecutive years. Additionally, India's Distance to Frontier score improved on 6 out of the 10 indicators, showing that India is increasingly progressing towards best practice.
 
 On Getting Electricity, the report recognised the efforts of Tata Power in Delhi to make it faster and cheaper to obtain an electricity connection. These efforts, combined with efforts in Mumbai last year, have allowed India to improve its rank on this indicator from 137 in Doing Business 2015 to 26 in this year's report, a 111 rank improvement.

The report also recognised the establishment of Commercial Divisions within the High Courts in Delhi and Mumbai to deal with commercial cases above Rs1 crore. This has allowed India to improve its rank by 14 places in 2 years.

In the area of Trading Across Borders, the report recognised the implementation of the Single Window Interface for Trade (ICEGATE), which integrates approvals and risk-based frameworks of customs and nine departments to provide traders with a single online interface for import clearances.

On paying taxes, the report recognised online filing and payment of returns at the Employee's Social Insurance Corporation.
 
The World Bank acknowledges only such reforms which have been implemented in Mumbai and Delhi by 1 June each year; if they are reported as implemented by business intermediaries.

The Bank is yet to consider major reforms, which include the enactment of the Insolvency and Bankruptcy Code by replacing outdated laws. Once implemented, it will improve our rank significantly in resolving insolvency index in next year's ranking.

The constitutional amendment to enact a Goods and Services Tax, which will promote a common market across the country did not also come under the Bank's scanner. On implementation, India's ranking on Starting a Business and Paying Taxes will improve significantly next year, says a government release.

Introduction of online single window systems for building plan approval in Delhi and Mumbai, integrating permissions of various agencies, which has reduced time to process and issue building plan approvals from 231 days to 21.85 days on an average in Delhi, and from 147 days to 26.39 days in Mumbai will also be reflected only in next year's report after private sector respondents have used the system widely.

Introduction and streamlining of INC-29 for company incorporation, which is currently used by 30 per cent of new companies.  This reform was not factored in this year because as per the World Bank's methodology more than 50 per cent of users should have used the system in the period 2 June 2015 to 1 June 2016.

The elimination of the requirement of a company seal while applying for government registrations and permissions at the time of setting up of a business. The Companies Act, 2013 was amended in 2015 to make provision for the same but has not been accounted for by the World Bank. The Bank has observed that, to open a bank account a company seal was required, which was not found to be the case.

Online registration for ESIC and EPFO subscribers, which has expedited the time to register, has been made applicable from 1 December 2015. The World Bank has not accepted the evidence provided in this regard.

Online filing and payment of returns at the Employee's Provident Fund Organisation, where the majority of returns and payments are now filed and paid fully online. This reform has not been considered even though it was implemented by EPFO on 5 June 2015. The World Bank has stated that this would be reflected in the rankings next year.

Over the past two years, the Government of India has implemented a host of reforms to make it easier for businesses to start, operate and exit. It is therefore disappointing that these achievements are not covered by the report due to methodological issues. The government has engaged with the World Bank multiple times in the process, and is hopeful that they will take into account all the implemented reforms in future reports. Importantly, transformative reforms like the Insolvency and Bankruptcy Code and GST can serve as launching pads for India to drastically improve its ranking in future reports, the release added.





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