Ease of doing business India Rank 2020 : Frontier IAS
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Ease of doing business India Rank 2020: Frontier IAS
Ease of Doing Business
- What is the Ease of Doing Business?
- What is the Doing Business Project?
- What is the importance of the project?
- What are the indicators used to calculate the EoDB Score?
- What are the advantages of Ease of Doing Business Rank?
- What is the performance of various economies in the latest published Ease of Doing Business Report 2020?
- How India is performing in the Ease of Doing Business Report 2020 over the years?
What is the Ease of Doing Business?
The Ease of Doing Business (EoDB) index is a ranking system established by the World Bank Group.
In the EODB index, ‘higher rankings’ indicate-
- Better and simpler regulations for businesses
- Stronger protection of property rights
- The regulatory environment is favorable to start and operate a local firm.
Economies are ranked on their ease of doing business, from 1–190.
What is the Doing Business Project?
- The Doing Business project was launched in 2002.
- It looks at domestic small and medium-sized companies and measures the regulations applying to them through their life cycle.
- It provides objective measures of business regulations and their enforcement across 190 economies.
What is the importance of the project?
- Comprehensive quantitative data is gathered and analyzed to compare business regulation environments across economies and over time.
- Thus, it encourages economies to
- compete towards more efficient regulation;
- offers measurable benchmarks for reform;
- It serves as a resource for academics, journalists, private sector researchers, and others interested in the business climate of each economy.
- It also offers detailed subnational studies, which cover business regulation and reform in different cities and regions within a nation.
- These studies provide data on the ease of doing business,
- rank each location, and
- recommend reforms to improve performance in each of the indicator areas.
- Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked.
What are the indicators used to calculate the EoDB Score?
The research contains data from 10 areas of business regulation (generally) :
- Starting a Business
- Dealing with Construction Permits
- Getting Electricity
- Registering Property
- Getting Credit
- Protecting Minority Investors
- Paying Taxes
- Trading across Borders
- Enforcing Contracts
- Resolving Insolvency
Doing Business also measures regulation on employing workers and contracting with the government, which are not included in the ease of doing business score and ranking.
- The performance of a country is measured across these 10 different dimensions in the last 12 months.
- Countries are ranked on the basis of the Distance to Frontier (DTF) score.
- Distance to Frontier (DTF) score highlights the gap of an economy with respect to global best practices.
What are the advantages of a Good Ease of Doing Business Rank?
Ranking in the Ease of Doing Business is very important for the economic growth of the country. A country will have the following advantages if get a good rank :
- In the global market, the country gets a good reputation that it is facilitating a good environment for business entities.
- It shows that the government is making it easy for local firms to start and operate the business.
- The ranking is also helpful for the investors, as they are able to predict which country will be favorable for their investments.
- Overall, the economical image of a country improves at a global level.
What is the performance of various economies in the latest published Ease of Doing Business Report 2020?
Highlights of the report :
- Worldwide, 115 economies made it easier to do business.
- In Doing Business 2020, the 10 top improvers are Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India, and Nigeria.
- These economies implemented a total of 59 regulatory reforms in 2018/19.
- They focused mainly upon the following areas -
- starting a business,
- dealing with construction permits, and
- trading across borders.
- Only two African economies rank in the top 50 on the ease of doing business; no Latin American economies rank in this group.
- More than half of the economies in the top-20 cohort are from the OECD high-income group;
- Most economies in the bottom 20 are from the Sub-Saharan Africa region.
What do the Doing Business 2020 data show?
- Doing Business 2020 data suggest that there is a considerable disparity between low and high-income economies on the ease of starting a business.
- An entrepreneur in a low-income economy typically spends about 50.0% of income per capita to launch a company, compared to just 4.2% for an entrepreneur in a high-income economy.
- Economies that score well in Doing Business witness higher levels of entrepreneurial activity.
- Increased levels of entrepreneurship generate
- better employment opportunities,
- higher government tax revenues, and
- improved personal incomes.
How India is performing in the Ease of Doing Business Report 2020 over the years?
- India ranked 63rd in Doing Business 2020 Report.
- India has emerged as one of the most attractive destinations for investments as well as for doing business.
- India jumped 79 positions from 142nd in 2014 to 63rd in 2019.
An ambitious program of regulatory reforms was launched by the Indian Government in 2014. A number of efforts were made to create a more business-friendly environment.
India’s major achievement is as follows:
Construction Permits: India’s ranking on this parameter has improved from 184 in 2014 to 27 in 2019.
- This improvement is mainly due to a decrease in the number of procedures and time taken for obtaining construction permits in India.
Getting Electricity: India’s ranking on this parameter has improved from 137 in 2014 to 22 in 2019.
- It takes just 53 days and 4 procedures for a business to get an electricity connection in India.
India’s ranks also improved in the following
- Protecting Minority Investors - 13
- Getting Credit - 25
India’s position as highlighted in the report by the researchers:
- leaders of India have adopted the Doing Business indicators as a core component of their reform strategies.
- Prime Minister Narendra Modi’s “Make in India” campaign focused on
- attracting foreign investment,
- boosting the private sector manufacturing
- enhancing the country’s overall competitiveness.
- The government turned to the Doing Business indicators to show investors India’s commitment to reform and to demonstrate tangible progress.
- In 2015 the government’s goal was to join the 50 top economies on the ease of doing business ranking by 2020.
- The reform efforts by the administration targeted all of the areas measured by Doing Business. A special focus was on
- paying taxes,
- trading across borders,
- resolving insolvency.
- The country has made an upward bounce, raising its ease of doing business ranking from 130 in Doing Business 2016 to 63 in Doing Business 2020.
Mains questions: In recent years India’s ease of doing business ranking has improved drastically but still, India has to go a long way. Discuss briefly the legal, political, economic, social, and cultural factors that are the hurdles in achieving the goal.
- Discuss India’s performance in recent years in the Ease of Doing Business Report.
- Discuss the areas where India showed improvement.
- Mention the points where India needs to improve.
- Discuss various factors acting as a hurdle in the way to be among the top 50 rank holders.
- Give a conclusion by giving some suggestions.
From launching the ambitious program of regulatory reforms in 2014 to setting an Ease of Doing Business Committee in 2015 and then getting 63rd rank in the Doing Business Report 2020, the Government of India has made a number of efforts to create a business-friendly environment in the country.
India has performed well in 7 out of 10 indicators. It has made it closer to international best practices. India has witnessed significant improvements in
- resolving insolvency,
- dealing with construction permits,
- registering property,
- trading across borders and
- paying taxes indicators.
But merely improving in the indicators selected by the World Bank and getting rank is not true success. There is a large difference between practical realities and what is shown in the papers.
Some of the measures related to business regulations are still underway :
- Paying Taxes
- Resolving Insolvency
- Enforcing Contracts
There are a number of issues with the Ease of doing business report itself. For example :
- The report does not measure every aspect of the business environment. For example :
- Macroeconomic conditions
- Level of employment
- Corruption and bribery
- Political and economic stability
- Poverty, etc.
- The strengths and weaknesses of the global financial system or the financial system of every economy are not considered by the report.
- The report does not cover all the regulations which are important. For example :
- Financial market regulations
- Environment regulations
- Intellectual property regulations
So it is clear that there is a lot more to do on the ground level to make the environment business-friendly in a true sense.
A number of legal, political, economic, social, and cultural factors are the hurdles in achieving the goal.
Contract enforcement: It is the biggest hurdle in the way of a business-friendly environment. It is due to a lack of proper mechanism of corporate governance and the slow working of the judicial system. This problem was also highlighted in the Economic Survey of India 2018-19.
Land acquisition: It is among one of the biggest difficulties for the corporates. The lack of a consolidated legislative measure is responsible for it.
Logistic infrastructure: The logistics sector of India is still growing and needs improvements to ensure a cost-effective and efficient flow of goods and services across the country.
Starting a business: The number of days required to start a business in India is still more than that required in the OECD countries.
GST Issue: The country has witnessed an overall increase in the taxpayers but it does not consider GST. Also, the process of filling the GST has become cumbersome and the time taken( in hours ) to file the GST returns has increased significantly. It needs to be reduced.
Insolvency and bankruptcy code: The IBC is still evolving and its effectiveness is yet to be determined.
Non-uniformity of business hubs: India’s most significant business hubs are concentrated in big cities like Delhi, Mumbai, Banglore, etc. A planned diversification strategy is a must that ensures the businesses touching the hinterland.
Internal Security: Apart from the problem of terrorism which is a global problem, issues like Naxalism and Maoism also affect certain regions of India and make it difficult to develop them into business hubs.
Regional instability: Various protests, strikes, and agitations, which are common and usual in a big democratic country like India, usually affect the business environment a lot. Companies hesitate to put their plants in regions that are unstable.
Apart from the above-discussed factors, the environmental and cultural factors like pollution, holy rivers, forests, tribal areas, etc., also act as hurdles in the path of administration and businessmen and investors.
All these hurdles are not easy enough to pass through them in a short period of time. It may take even decades and a lot of reforms to get the things done.
The aim of the Indian Government is to be among the top 50 economies of the world, where the simplified regulations and helpful initiatives make it easy for a business to start and operate through its lifetime. The journey has just started and India has to go a long way ahead.