Bharat Ganrajya

India has jumped 30 spots to number 100 in the latest Ease of Doing Business report for 2018 released by the World Bank today. "India stands out this year as one of the 10 economies that improved the most in the areas measured by Doing Business," the report said.

The report, which ranks New Zealand, Singapore and Denmark as the easiest countries in the world to do business in, ranked China at 78, which is 22 spots above India. But China's rank did not improve, even though its Distance to Frontier (DTF) score increased by 0.40 points. India's DTF score is at 60.76, a mega jump of 4.71 points from last year, when the World Bank ranked India at 130th position.

India's 30-place elevation is the highest jump that any country has ever made in this index, said FM Jaitley.

He said it was a clear and big acknowledgement of the structural reforms that Modi government has been undertaking.

In the last 3 years, the government has been making efforts to simplify procedures which led to improvements in many areas, Jaitley said.

India witnessed the biggest jump in the criterion of paying taxes, moving up 53 places on the back of improvements in the tax systems.

"A study on India, for example, shows that inefficient licensing and size restrictions cause misallocation of resources, reducing total factor productivity by preventing efficient firms from achieving their optimal scale and allowing inefficient firms to remain in the market. The study by the World Bank showed that removing these restrictions would boost total factor productivity by an estimated 40-60 per cent," the report said.

"India also streamlined the business incorporation process by introducing the SPICe form (INC-32), which combined the application for the Permanent Account Number (PAN)," the report said.

The World Bank report also appreciated India's new insolvency law. "India also strengthened access to credit by amending the rules on priority of secured creditors outside reorganization proceedings and adopting a new insolvency and bankruptcy code that introduced a reorganization procedure for corporate debtors," the report said.

The government's push to resolve the issue of non-performing assets, too, didn't go unnoticed. "In India the establishment of debt recovery tribunals reduced non-performing loans by 28% and lowered interest rates on larger loans, suggesting that faster processing of debt recovery cases cut the cost of credit.

This is a rare validation of the sweeping economic reforms undertaken by the Narendra Modi government, with the nationwide Goods and Services Tax being implemented following the demonetisation of Rs 500 and Rs 1000 notes last year in addition to the insolvency law passed last year.

The World Bank also complimented India for easing tax compliance on businesses by implementing an online platform for the electronic payment of the Employee Provident Fund and introducing administrative measures to ease income tax compliance.

Earlier this year, credit rating agency Moody's had not upgraded India's score, despite the government claiming that the reforms which were in place would strengthen the fundamentals of the economy.

Former Chief Economic Adviser Arvind Subramanian had even flayed credit rating agencies, saying they have not upgraded India "despite clear improvements in our economic fundamentals" which include inflation, growth, and current account performance.

India implemented substantive changes in the following areas in 2016/17:

Starting a business: India made starting a business faster by merging the applications for the Permanent Account Number (PAN) and the Tax Account Number (TAN) and by improving the online application system. Mumbai also made starting a business faster by merging the applications for value added tax and the Profession Tax (PT).

Dealing with construction permits : India reduced the number of procedures and time required to obtain a building permit by implementing an online system that has streamlined the process at the Municipality of New Delhi and Municipality of Greater Mumbai.

Getting credit: India strengthened access to credit by amending the rules on priority of secured creditors outside reorganization proceedings and by adopting a new law on insolvency that provides a time limit and clear grounds for relief to the automatic stay for secured creditors during reorganization procedures. This reform impacts the data for both Mumbai and Delhi.

Protecting minority investors: Protections for minority investors were strengthened by increasing the remedies available in cases of prejudicial transactions between interested parties. This reform applies to both Delhi and Mumbai.

Paying taxes: In both Delhi and Mumbai, paying taxes was made easier by requiring payments to the Employees Provident Fund to be made electronically, and introducing administrative measures that make it easier to comply with corporate income tax regulations.

Trading across borders: In Mumbai, reducing the time taken to comply with import regulations at Nhava Sheva port made it much quicker to trade across borders. In Delhi and Mumbai, the elimination of merchant overtime fees and the increased use of electronic and mobile platforms reduced the time taken to comply with both export and import regulations.

Enforcing contracts: In both Delhi and Mumbai, the introduction of the National Judicial Data Grid made it possible to generate case management reports on local courts, thereby making it easier to enforce contracts.

Resolving insolvency: India made resolving insolvency easier by adopting a new insolvency and bankruptcy code that introduced a reorganization procedure for corporate debtors and facilitated continuation of the debtor’s business during insolvency proceedings. This reform applies to both Delhi and Mumbai.