India’s Performance in World Bank Doing Business Report

The World Bank’s annual Doing Business 2017 report was  released recently. It 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 recognized for improvement in four indicators.

Improvement in Ranking and Distance to Frontier

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.

Reforms Recognized by World Bank

On Getting Electricity, the report recognized 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 has also recognized the establishment of Commercial Divisions within the High Courts in Delhi and Mumbai to deal with commercial cases above Rs. 1 crore. This has allowed India to improve its rank by 14 places in 2 years.

In the area of Trading Across Borders, the report recognized 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 recognized online filing and payment of returns at the Employee’s Social Insurance Corporation.

Reforms Not Recognized by World Bank This Year

The World Bank acknowledges only such reforms which have been implemented in Mumbai and Delhi by 1st of June each year; if they are reported as implemented by business intermediaries. Following major reforms have not been accounted for in current year’s report:

I. Enactment of the Insolvency and Bankruptcy Code has transformed India’s corporate insolvency landscape by replacing outdated laws with a new legal framework. Once implemented, it will improve our rank significantly in resolving insolvency index in next year’s ranking.

II. The constitutional amendment to enact a Goods and Services Tax, which will promote a common market across the country. On implementation, our rank on Starting a Business and Paying Taxes will improve significantly next year.

III. Introduction of online single window systems for building plan approval in Delhi and Mumbai, integrating permissions of various agencies. This 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. This will be reflected only in next year’s report after private sector respondents have used the system widely.

IV. Introduction and streamlining of INC-29 for company incorporation, which is currently used by 30% 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 2nd June, 2015 to 1st June, 2016.

V. 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.

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

VII. Online filing and payment of returns at the Employee’s Provident Fund Organization, 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 5th June, 2015. The World Bank has stated that this would be reflected in the rankings next year.

VIII. Streamlining of name reservation process at Ministry of Corporate Affairs, reducing the time taken to an average of 1.86 days.

IX. Registration under VAT and Profession Tax has been merged into a single process from 1st January, 2015 by Government of Maharashtra.

X. Registration for VAT in Delhi has been made online and is allotted real time and business can start operations immediately on receipt of TIN number.

XI. Delhi Pollution Control Committee has removed the requirement of obtaining consent to establish for a non-hazardous warehouse.

XII. Time required to get electricity connection has been reduced to 15 days in both Mumbai and Delhi but the World Bank has erroneously mentioned that it takes 30 days in Delhi and 47 days in Mumbai to get electricity connection.

Reforms for Next Year’s Ranking

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 Government remains committed to its goal of achieving among the top 50 rank in the report in the coming years. Action is already being taken to implement further reforms with an eye on next year’s report, including:

I. Implementing the Insolvency and Bankruptcy Code by notifying regulations and institutionalizing proceedings at the National Company Law Tribunals.

II. Implementing GST nationwide by April 1, 2017.

III. Implementing a single form for company incorporation, name availability and director’s identification number and making it mandatory.

IV. Merging registries of charges at MCA and CERSAI into a single registry to build a unified online data base of security interests over movable assets.

V. Further streamlining processes related to customs clearances to bring about faster and cheaper processing time including increase direct delivery of goods and integrate clearances/NoCs of all agencies for both export and import.

VI. Introduction of paper less court procedures and systems including e-filing, e-payment, e-summons and downloading of electronically signed orders in commercial courts.

VII. Make the color coded maps of Airports Authority of India, Delhi Urban Arts Commission, Delhi Metro Rail Corporation, Archaeological Survey of India GIS enabled and integrate them with the Single Window System of Municipal Corporation of Delhi.

VIII. Allow online filing of application, scheduling of appointment and payment of fees for registering properties.

IX. Digitize all encumbrances and record of rights of lands for last 30 years and make them available online.

X. Integrate land records with sale deeds at Sub-Registrar offices.