Introduction to ease of doing business
Ease of doing business is an index issued by the World Bank. It is an aggregate value that includes various parameters which define the Ease of doing business in a country.
Understanding Ease Of Doing Business
- It is determined by aggregating the distance to frontier scores of various economies. According to that parameter, the distance to frontier score uses the 'regulatory best practices for doing business as the parameter and benchmark economies.
- For each of the indicators that form the statistic' Ease of doing business,' a distance to frontier score is estimated, and all the scores are aggregated. The aggregated score will be the Ease of doing business index.
- Indicators for which distance to frontier is computed include construction permits, registration, getting credit etc. Countries are ranked as per the index.
India's ranking improved on four parameters
Starting a Business- India has made starting a business simpler by completely integrating multiple application forms to a general incorporation form
Dealing with Construction Permits- For example, developing a warehouse cost around 4% of the warehouse value when compared to 5.7% in the previous year
Trading across Borders- with an electronic platform- improved electronic submission methods for documents and upgrades to port infrastructure, import and export process became more accessible.
Resolving Insolvency- The recovery rate under resolving insolvency has developed significantly from 26.5% to 71.6%. The time needed for resolving insolvency has also come down considerably from 4.3 years to 1.6 years.
Challenges For Ease Of Doing Business
It takes around a month to start a business in India, while the OECD average itself is 12 days. Though some states have eased up the schemes for starting a business, this is yet to be obtained on a pan India basis.
It only measures the policy side and ignores market forces and other factors like human resource. Therefore, it should not be taken at face value for determining which country is better to do business in.
The procedures to secure permits are cumbersome and require permissions from various departments.
Though India has been an average improvement in enforcing contracts, it takes more time than fifteen years ago. The lack of effective means for enforcing contracts prevents growth and is a disincentive for the private sector.
India s largest urban agglomerations cannot host large factories to generate sufficient employment. The procedural reforms haven't yet reached the hinterland.
