Global Ease of Business: Debt clean-up, tax reforms lift India 23 ranks up to 77

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Global Ease of Business: Debt clean-up, tax reforms lift India 23 ranks up to 77


Ministers Arun Jaitley, Suresh Prabhu speak on the ease of doing business rankings in New Delhi, Wednesday. (Photo: Anil Sharma)

INDIA JUMPED 23 places to No.77 among 190 countries in the World Bank’s “Ease of Doing Business (EODB) 2019” rankings, aided largely by improvement in areas such as “dealing with construction permits”, “trading across borders”, “getting electricity”, “getting credit” and “starting a business”.

However, compared to last year, India saw its ranking dip on various other parameters, such as “registering property”, “protecting minority investors”, “paying taxes” and “resolving insolvency”.

Last year, India had moved up 30 places to the 100th position. In 2016, 2015 and 2014, India had not improved much and was placed at 130, 131 and 134, respectively, in the ranking.

The report released Wednesday noted that India is among the top ten economies improving the most across three or more areas measured by the study, alongside countries such as Afghanistan, Djibouti, China, Azerbaijan, Togo, Kenya, Côte d’Ivoire, Turkey and Rwanda.

India is the only other country, alongside Djibouti, to be in top ten for second year in a row. Delhi and Mumbai are the only cities covered in India by the report.

New Zealand tops the list of 190 countries, followed by Singapore, Denmark, and Hong Kong. The US is placed eighth and China has been ranked 46th while Pakistan is placed at 136.

In an official statement, the Commerce and Industry Ministry said: “India has improved in rank in six out of ten indicators and has moved closer to international best practices…The most dramatic improvements have been registered in the indicators related to ‘construction permits’ and ‘trading across borders’.”

Addressing a news conference after the report was released, Finance Minister Arun Jaitley said Prime Minister Narendra Modi had set a target of breaking into the top 50 and that was probable if improvements were done on the time taken to start a business, register property, enforce contracts, pay taxes and implement insolvency laws.

The most significant improvement has been seen in “dealing with construction permits”, where the ranking has improved to 52 from 181. This is on account of the number of procedures coming down to 17.9 from 30.1, along with a reduction in the number of days to deal with construction permits — to 94.8 days from 143.9 days last year. The cost of permit, as a percentage of warehouse value, has also come down to 5.4 per cent, compared with 23.2 per cent a year ago.

Similarly, India witnessed improvement in the ranking for “trading across borders”, which rose to 80 from 146 last year. This is also due to a notable reduction in time and cost to import and export, in terms of documentary and border compliance.

Speaking to The Indian Express, Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion (DIPP), said: “We started this process of two-way communication, where we — DIPP and other departments and agencies concerned — communicate the reforms to the stakeholders and then get the feedback from them whether it is working or not. Then we again correct our reforms, online systems, rules or anything else. So, this continuous work is being done.”

Noting that the two economies with the largest populations — China and India — demonstrated “impressive reform agendas”, the World Bank said India also focused on streamlining business processes.

It said that India made starting a business easier by integrating multiple application forms into a general incorporation form. “India also replaced the value-added tax with the GST (Goods and Services Tax) for which the registration process is faster,” the report said.

Stating that a well-designed insolvency framework is a vital determinant of debt recovery, the report said the establishment of debt recovery tribunals in India “reduced non-performing loans by 28 per cent and lowered interest rates on larger loans, suggesting that faster processing of debt recovery cases cut the cost of credit”.

The World Bank observed that India has made paying taxes easier by replacing many indirect taxes with a single GST for the entire country backed by the fact that the number of payments per year has gone down to 11.9 from 13, and total tax and contribution rate — as a percentage of profit — has been reduced to 52.1 per cent from 55.3 per cent.

However, the deterioration in ranking of the “paying taxes” parameter to 121 from 119 in 2018 could be attributed to 275.4 hours spend every year paying taxes, higher than 214 hours last year. “India made paying taxes easier by replacing many indirect taxes with a single indirect tax, the GST, for the entire country. India also made paying taxes less costly by reducing the corporate income tax rate and the employees’ provident funds scheme rate paid by the employer,” the report said.

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