The ease of doing business index 2020 UPSC? Where does India stand?

By | November 14, 2020

The ease of doing business index is an index created jointly by Simeon Djankov and Gerhard Pohl, two leading economists at the Central and Eastern Europe sector of the World Bank Group.

The World Bank recently released its Ease of Doing Business Report, 2020. The indicator measures the performance of countries across 10 different dimensions in the 12-month period ending May 1, 2019.

  • According to the report, New Zealand retained its 1st position whereas Somalia was ranked at 190th spot.
  • India was placed at 63rd position this time (2019) out of 190 countries marking an improvement of 14 places from its 77th position in 2018.

    • India’s score improved from 67.23 in the previous year to 71.0 this year.
    • India for the third consecutive year was present in the list of 10 economies where the business climate has improved the most.

Important features of India’s performance

  • The World Bank has recognized India as one of the top 10 improvers for the third consecutive year.
  • Recovery rate under resolving insolvency has improved significantly from 26.5% to 71.6%.
  • The time taken for resolving insolvency has also come down significantly from 4.3 years to 1.6 years.
  • India continues to maintain its first position among South Asian countries. It was 6th in 2014.

India’s ranking improved basically on four parameters

  • Starting a Business- India made starting a business easier by fully integrating multiple application forms into a general incorporation form,
  • Dealing with Construction Permits- For example, building a warehouse cost around 4% of the warehouse value as compared to 5.7% in the previous year,
  • Trading across Borders– with a single electronic platform- improved electronic submission methods for documents and upgrades to port infrastructure, import, and the export process became easier, and
  • Resolving Insolvency- The recovery rate under resolving insolvency has improved significantly from 26.5% to 71.6%. Also, the time taken for resolving insolvency has also come down significantly from 4.3 years to 1.6 years.
  • The parameters that are taken into consideration to rank countries as per their ease of doing business are given in the table below:
1Starting a businessThe ease of the procedures to start a new venture along with the time, cost and minimum capital required are also considered
2Dealing with construction permitsHow easy is it to get permission to build a warehouse
3Getting electricityThe ease of obtaining a permanent connection for electricity in a newly constructed warehouse.
4Registering propertyHow easy and uncomplicated is the process of registering commercial real estate
5Getting creditThe depth of credit information index, as well as strength of legal rights index, is studied
6Protecting investorsVarious indices on the extent of disclosure and ease of shareholder suits are taken into consideration
7Paying taxesStudies the number of taxes paid, hours per annum spent on filing tax returns and the total tax payable as a share of gross profit
8Trading across bordersIncludes the process of export and import of products are in the country.
9Enforcing contractsIt involves studying the time, cost and effort required to enforce a debt contract
10Resolving insolvencyChecks the time, cost and percentage recovery rate under a bankruptcy proceeding
  • India continues to maintain its first position among South Asian countries. It was 6th (in 2014).
  • The World Bank will now include Kolkata and Bengaluru, besides Delhi and Mumbai, for preparing ease of doing business report, in order to provide a holistic picture of the business environment of the country.

What are the problem areas?

  • India still lags in areas like enforcing contracts and registering property.
  • It takes 58 days and costs on average 7.8 per cent of a property’s value to register it, longer and at greater cost than among OECD high-income economies.
  • And it takes 1,445 days for a company to resolve a commercial dispute through a local first-instance court, almost three times the average time in OECD high-income economies.

Steps were taken by the government to improve EODB and innovation:

  • In order to promote innovation, the government has amended patent rules.
  •  The final Patent (Amendment) Rules, 2019 – published on 17 September 2019 amending The Patents Rules, 2003 has led to a significant simplification of rules, especially for startups and MSMEs.
  • In order to promote exports and export competitiveness, the Export Credit Guarantee Corporation (ECGC) has introduced a new Export Credit Insurance Scheme (ECIS) called ‘NIRVIK’.
  • Under NIRVIK for exporters in which increased insurance cover for export credit has been extended by banks from the existing average of 60 percent to 90 percent for both principal and interest.
  • To enhance ease of doing business, the deemed export drawback has been allowed on the All Industry Rate of drawback schedule. 
  • An online portal for filing applications under the ‘Transport and Marketing Assistance (TMA)’ scheme for specified agriculture products has been launched.
  • The online “Origin Management System” gives a single access point for all exporters, for all free trade agreements (FTAs), preferential trade agreements (PTAs), and for all agencies. India has 15 FTAs/PTAs and 7 lakh ‘Certificates of Origin’ are issued annually. 
  • A capital of Rs389 crore has been infused into Export Credit Guarantee Corporation (ECGC) to provide extra support to exports to emerging and challenging markets like Africa, CIS, Latin America, and Asian countries.
  • Scheme for Remission of Duties or Taxes on Export Product (RoDTEP) formulated to replace existing Merchandise Exports from India (MEIS) Scheme, will be a WTO compliant scheme for promotion of exports.
  • A National Logistics Policy is being prepared with the aim of bringing down total logistics costs from 14 percent to 9 percent of the country’s GDP. The policy aims to boost business competitiveness, drive economic growth, and make India a global logistics hub.
  • The Multi-Modal Transportation of Goods Bill, 2019 has been finalized for approval. This aims at facilitating the movement of goods for exports, imports, and domestic trade. It will help to fix accountability and liabilities for violation of its provisions.
  • The Agriculture Export Policy has been approved with an outlay of Rs206 crore for 2019-20. In order to establish linkage between FPOs and the exporters, a portal has been created by the Agricultural and Processed Food Products Export Development Authority (APEDA).
  • India has also secured an agreement for a review of the ASEAN FTA (ASEAN-India Free Trade Area-AIFTA) after repeated follow-up. This will help in removing rules that affect Indian producers and exporters and will also promote Indian exports and Make in India.
  • The Directorate General of Trade Remedies (DGTR) for the first time initiated two cases of bilateral safeguards to protect the domestic industry from injury. No bilateral safeguard has ever been initiated in the past by DG Safeguards/Directorate General of Anti-Dumping and Allied Duties.

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