During 2014-15, starting a business became a bit easier in India, says the 'Doing Business 2016' report
Out of the 189 economics studied, the World Bank has moved up India to 130th position, from 134th rank, in its annual ease of doing business ranking. The report for 2013-14 ranked India at 140, but this year’s report features the recalculated 2015 rankings, in which India comes at 134, computed according to a new methodology.
According to the report, during 2014-15, India made starting a business easier by eliminating the minimum capital requirement and the need to obtain a certificate to commence business operations. This reform applies to both Delhi and Mumbai.
India also ranked amongst the world's top 10 in Protecting Minority Investors with a global ranking of 8, noted the "Doing Business 2016: Measuring Regulatory Quality and Efficiency" report. It also noted that the Indian law grants minority shareholders strong protection from conflicts of interest and provides extensive rights for shareholders in major corporate governance.
In Starting a Business, for example, India made significant improvements by eliminating the minimum capital requirement and a business operations certificate, saving entrepreneurs an unnecessary procedure and five days' wait time.
In addition, obtaining electricity connection become easier in India during 2014-15, the report says, adding, "The utility in Delhi made the process for getting an electricity connection simpler and faster by eliminating the internal wiring inspection by the Electrical Inspectorate. The utility in Mumbai reduced the procedures and time required to connect to electricity by improving internal work processes and coordination."
Talking about developments in India, the World Bank report says, the country is the South Asian economy recording the biggest increase in the distance to frontier score since 2004. It says, "One of the areas of greatest improvement has been starting a business. In 2004, India cut time from the process for obtaining a permanent account number (an identification number for firms), and in 2006, it speeded up the process for obtaining a tax registration number. In 2010, India established an online system for value added tax registration and replaced the physical stamp previously required with an online version. And in the past year India eliminated the paid-in minimum capital requirement and streamlined the process for starting a business. More reforms are ongoing—in starting a business and other areas measured by Doing Business—though the full effects have yet to be felt”. (see box below)
Top 10 improvers implemented 39 regulatory reforms
Costa Rica, Uganda, Kenya, Cyprus, Mauritania, Uzbekistan, Kazakhstan, Jamaica, Senegal and Benin are among the economies that improved the most in 2014-15 in areas tracked by Doing Business. Together, these 10 top improvers implemented 39 regulatory reforms making it easier to do business. Sub-Saharan Africa alone accounted for about 30% of the regulatory reforms making it easier to do business in 2014-15, followed closely by Europe and Central Asia, the annual report 'Doing Business 2016' from World Bank says.
Who improved the most in each region?
Just as Georgia stands out in Europe and Central Asia for having made big strides toward better and more efficient business regulation, at least one economy stands out in every other region for its improvement in the areas
measured by Doing Business: Rwanda in Sub-Saharan Africa; Colombia in Latin America and the Caribbean; the Arab Republic of Egypt in the Middle East and North Africa; China in East Asia and the Pacific; India in South Asia; and Poland in the OECD high-income group (see chart below). Still, while reforming in the areas measured by Doing Business is important, doing so is not enough to guarantee sound economic policies or to ensure economic growth or development, the Report says.
"While Doing Business reforms have many potential positive effects, these effects can be undermined by such factors as political instability, macroeconomic instability and civil conflict. Being recognized as a regional top improver does not mean that these economies have exemplary business regulation; instead, it shows that thanks to serious efforts in regulatory reform over several years, they made the biggest advances toward the frontier in regulatory practice," the report added.
Reliability of Power Supply
According to the World Bank report, electricity outages can have serious effects on businesses. They can damage assets (such as electronics) and inventory. And they can disrupt work by shutting down equipment and cutting off lighting, heating or internet connections.
The effects go beyond economic costs. An unreliable electricity supply also has consequences for a society’s well-being and living conditions. Only 25% of health facilities in Kenya can count on a reliable power supply. In India, nearly half of health facilities have no access to electricity at all. Most public services are compromised when power shuts down. And outages can pose a threat to personal safety—such as by putting out streetlights and traffic lights and by disabling burglar alarms in homes, the Report added.
Reforms in South Asia
Bhutan and Sri Lanka also implemented two reforms each during the past year, while Afghanistan, Bangladesh and Maldives undertook one reform each.
The highest number of reforms was in the areas of Starting a Business, Paying Taxes and Getting Electricity, with two reforms in each area.
No reforms were recorded in the areas of Trading Across Borders, Protecting Minority Investors, Enforcing Contracts, and Resolving Insolvency.
"South Asian economies have been advancing steadily in recent years in improving their regulatory environment and making it more business friendly," said Rita Ramalho, manager of the Doing Business project.
"In doing so, the region can stimulate both entrepreneurship and job creation for its relatively young population," she said.
On an average, the region's economies rank best in the areas of Starting a Business (with a regional average rank of 96) and Protecting Minority Investors (regional average rank of 83).
The region's weakest performance is in the areas of Enforcing Contracts and Registering Property. For example, it takes an average of 1,077 days to resolve a commercial dispute through the courts.
The region's top ranked economy is Bhutan, with a global ranking of 71, followed by Nepal (99). Rankings of other large economies in the region are: Bangladesh (174), Pakistan (138), and Sri Lanka (107).
The report noted that globally 85 developing economies implemented 169 business reforms during the past year, compared with 154 reforms the previous year.
High-income economies carried out an additional 62 reforms, bringing the total for the past year to 231 reforms in 122 economies around the world.
"A modern economy cannot function without regulation and, at the same time, it can be brought to a standstill through poor and cumbersome regulation," said World Bank chief economist and senior vice president Kaushik Basu.
"The challenge of development is to tread this narrow path by identifying regulations that are good and necessary, and shunning ones that thwart creativity and hamper the functioning of small and medium enterprises," he said.