It's never been a better time to do business in India
You don’t need to be a business pundit or an industry veteran to see that it’s a good time to do business in India. Between the government’s sustained efforts to boost innovation & the ever-increasing entrepreneurial spirit, it’s easy to see that things are only getting better with each passing year.
Don’t just take our word for it, though. Each year, the World Bank breaks down the ease of doing business in different countries across the globe, based on factors like the ease of starting a business, getting electricity, registering property, getting credit, protecting investors and trading across borders, to name a few. Performance across these subindices is then used to formulate an overall rank for the nation, which determines how easy it is to do business there.
In the years since the ‘Doing Business’ report’s inception, India’s performance left something to be desired, with the country coming in at 130 in 2017. However, there has been an upswing in the national ease of business, with India being ranked 100 for 2018. Going up 30 spots, it is among the 10 countries that showed the most improvement since the last evaluation. This is accompanied by a noteworthy increase in the distance to frontier (DTF) score, which determines how close each country is to following the best business practices in each sphere. In fact, the overall DTF increased from 56.05 in 2017 to 60.76 in 2018, illustrating the extent of the progress that has been made.
A steady rise in India’s DTF score across each parameter shows how much closer the country is to following globally accepted best practices.
This improvement has been attributed to a number of business reforms that have been brought in over the last few years.
Improvements to the system begin right at the start of the process – setting up a business. What was once a tedious exercise is now exponentially easier, as business owners can now submit a common application for a Permanent Account Number (PAN) and a Tax Account Number (TAN) online. In Mumbai, it is also possible to merge the applications for value-added tax and professional tax.
Though the process of starting a business has certainly benefited from the digitisation of the country, it is far from the only sphere to benefit from it. A single-window system now facilitates submission and approval of building plans, prior to requesting a permit, streamlining the procedure and reducing the turnaround time required for it. Legal reforms like the introduction of the National Judicial Data Grid, meanwhile, have increased transparency in the judicial system and are making a significant dent in the number of pending cases, including those that deal with enforcing contracts. Digitisation has also made it easier than ever to pay taxes, by requiring that payments be processed electronically to the Employees Provident Fund.
When it comes to financial reforms, the increased access to credit that is now available to entrepreneurs is of particular note. India has implemented a series of reforms that eschew old rules about priority of secured creditors, and adopted the insolvency and bankruptcy code, which makes way for a reorganisation procedure in the worst case scenario, while allowing the debtor to continue conducting his/her business during the insolvency proceedings.
This, combined with other positive reforms, such as improvement of infrastructure at import borders and increased labor market regulation, has put India on the map. And while we still have a long way to go, there are a number of changes and policies taking effect that promise to make things even easier and more effective.
Perhaps one of the most notable details is the introduction of the Goods & Services Tax (GST), which wasn’t factored in for the ‘Doing Business’ report, whose cut-off was June 2017. This consolidation of taxes has further simplified claiming tax credits, something that is bound to make an impact on next year’s ranking. Additionally, the online portal for securing construction permits is expected to go live in more cities soon, which is another step in the right direction.
All this makes it easy to see why Finance Minister Arun Jaitley believes that it is realistically possible for India to work its way towards a top 50 ranking soon. And with the way things are going, it's hard to disagree!