Boosting India's Economic Growth Through Ease of Doing Business Reforms

INTRODUCTION

Doing business report measures aspects of business regulations that affects domestic firms situated in the largest business city of 190 economies.In addition for 11 economies a second city is also covered under this report.

The first Doing Business study, published in 2003 by World Bank, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies.Doing Business covers 12 areas of business regulation. Ten of these areas —

- starting a business,

- dealing with construction permits,

- getting electricity,

- registering property,

- getting credit,

- protecting minority investors,

- paying taxes,

- trading across borders,

- enforcing contracts, and

- resolving insolvency

are included in the ease of doing business score and ease of doing business ranking. Doing Business also measures regulation on employing workers and contracting with the government, which are not included in the ease of doing business score and ranking. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains to provide an objective basis for understanding and improving the regulatory environment for business around the world.

DATA AT INDIA LEVEL

India ranked 63rd among 190 economies in Doing Business 2020: World Bank Report. In 2014, the Government of India launched an ambitious program of regulatory reforms aimed at making it easier to do business in India. The program represents a great deal of effort to create a more business-friendly environment. India as one of the top 10 improvers, for the 3rd time in a row, with an improvement of 67 ranks in 3 years.

India has emerged as one of the most attractive destinations not only for investments but also for doing business. India jumps 79 positions from 142nd (2014) to 63rd (2019) in 'World Bank's Ease of Doing Business Ranking 2020'.

To further enhance the ease of doing business in the country more than 39,000 compliances have been reduced and more than 3,400 legal provisions have been decriminalized. Positive changes have led to this impressive improvement in India’s ranking in the EoDB index. Promoting trust-based governance at all levels, Hon’ble Finance Minister Nirmala Sitharaman introduced the Jan Vishwas Bill to amend 42 Central Acts. An integrated system of unified filing processes at the central and state-level departments will be set up to avoid repeated submission of documents, ensure the authenticity of the same and lead to quicker processing of requests.

India has worked towards improving the ten major areas of the report as following:

1. Starting Business

   • Permanent Account Number (PAN), Tax Deduction & Collection Account Number (TAN), Director Identification Number (DIN) have now been merged into a single form (SPICe) for company incorporation.
   • Five-page form and other attachments for reserving the name of the Company with the Ministry of Corporate Affairs has been simplified into a simple web service with only three fields to be filled.
   • Registration under Employee State Insurance Corporation (ESIC) and Employee Provident Fund Organisation (EPFO) are available at Shram Suvidha portal as a common online service with no physical touch point.
   • No requirement of inspection before registration under Shops & Establishment Act in Mumbai and Delhi.
   • Companies Act was amended to eliminate the requirement of a common company seal.

2. Dealing with Construction Permits

   • Municipal Corporations of Delhi, as well as Municipal Corporation of Greater Mumbai, have introduced fast track approval systems for issuing building permits with features such as Common Application Form (CAF), provision of using digital signatures, and online scrutiny of building plans.
   • Delhi has uniform building by-laws which allow for risk-based classification regimes for different building types. It has a provision of deemed approval of sanctioning building plans within 30 days.
   • For construction permits, the time reduced from 128.5 to 99 days in Mumbai and from 157.5 to 91 days in Delhi between Doing Business 2018 and 2019 reports.
   • Total number of procedures reduced to 20 in Mumbai and 16 in Delhi.
   • Cost of obtaining construction permits reduced from 23.2% to 5.4% of the economy’s per capita income.

3. Getting Electricity

   • Electricity connection is provided within 7 days if no Right of Way (RoW) is required and within 15 days where RoW is required.
   • Service line cum Development charges are now capped at US$ 357.6 in Delhi.
   • The number of documents required for getting an electricity connection has been reduced to two and no physical documents are accepted.
   • Total number of procedures reduced to 3 in Delhi and 4 in Mumbai.

4. Registering Property

   • All sub-registrar offices have been digitized and its records have been integrated with the Land Records Department, in both Delhi and Mumbai.
   • In Mumbai, all property tax records have been digitized. Property is mutated automatically after registration. The digitization of property records ensures transparency and allows citizens to ascertain the history of transactions in digital mode.
   • Online service for charges search at Registrar of Companies reduces the time taken for this procedure significantly.
   • Statistics regarding the number of land disputes at Revenue Courts are available online in both Delhi and Mumbai.

5. Getting Credit

   • Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI) is a geographically unified electronic registry that provides for registration by asset type. Since 2017, CERSAI also provides search through debtor's name.
   • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) (Central Registry) Rules, 2011 was amended to include additional types of charges, including a security interest in - immovable property by the mortgage, hypothecation of plant and machinery, stocks, debt including book debt or receivables, intangible assets, patent, copyright, trademark, under-construction building.
   • The definition of property, which now includes immovable as well as intangible, allows CERSAI to register these additional charges.

6. Trading Across Borders

   • The Central Board of Excise and Customs (CBEC) has implemented the ‘Indian Customs Single Window Project’ to facilitate trade. Importers and exporters can electronically lodge their Customs clearance documents at a single point.
   • The number of mandatory documents required for customs purposes, for both import and export of goods, has been reduced to three.
   • e-Sanchit, an online application system, allows traders to file all documents electronically.
   • The electronic self-sealing of the container at the factory has reduced time and cost for exporting firms.
   • A computerized risk management system has brought transparency and reduced the frequency of custom inspections significantly.
   • Central Board of Indirect Taxes and Customs has provided a facility for Advance Bill of Entry (Advance Import Declaration).

7. Enforcing Contracts

   • The Commercial Courts and Appellate Division of High Courts have been established in Mumbai and Delhi.
   • National Judicial Data Grid (NJDG), provides case data including case registration, cause list, case status, and orders/ judgements of courts district-wise across the country. NJDG has been open to the public since 2015.
   • New cases in district courts are assigned to judges randomly through an automated system in Delhi and Mumbai.
   • e-filing of cases has been introduced in district courts of Delhi and Mumbai. A case management tool has been developed with functionality of sending a notification to lawyers, viewing court orders/judgements, tracking the status of cases, and semi-automatically generating court orders, etc.

8. Paying Taxes

   • Reduction of corporate tax from 30% to 25% for mid-sized companies.
   • Domestic companies can opt for a concessional tax regime @ 22% (effective tax rate: 25.17% inclusive of surcharge and cess). Such a company cannot claim any income tax incentive or exemption. Such companies are not liable to pay the Minimum Alternate Tax (MAT).
   • The tax rate for new domestic manufacturing companies is now 15% (17.01% inclusive of surcharge and cess). Companies that have been incorporated on or after 1st October 2019, making fresh investments in manufacturing and commencing production on or before 31 March 2023, may opt for such a concessional tax regime. Such companies cannot avail of any other income tax exemption/incentive under the Income-tax Act.
   • Robust IT infrastructure of online return filing for Indian taxpayers.
   • The Goods and Service Tax came into effect from 01 July 2017. It subsumes eight taxes at the Central and nine taxes at the State level.
   • The Employee State Insurance Corporation (ESIC) has developed a fully online module for electronic return filing with online payment. This has substantially reduced the time to prepare and file returns.
   • With the introduction of the e-verification system, there remains no physical touch point for document submission to income tax authorities.

9. Resolving Insolvency

   • The Insolvency and Bankruptcy Code of 2016 has introduced new dimensions in resolving insolvency in India. It is India’s first comprehensive legislation on corporate insolvency.
   • Under Fast-track Corporate Insolvency Resolution Process (CIRP) for mid-sized companies, the process for insolvency shall be completed within 90 days with a maximum grace period of another 45 days.

10. Protecting Minority Investors

    • India has undertaken various reforms aimed at improving corporate governance and investor protection. These reforms include amendments to company laws, strengthening regulations related to related-party transactions, enhancing disclosure requirements, and promoting shareholder activism.

Despite these efforts, challenges remain, such as concerns about the enforcement of regulations, the effectiveness of corporate governance mechanisms, and the speed of dispute resolution processes. Additionally, issues related to corporate transparency, insider trading, and the role of institutional investors are areas of ongoing concern.

Technology Driven Governance

The Indian government has implemented various digital governance initiatives to enhance business regulations and streamline processes. Some notable examples include:

eBiz: A platform designed to provide a single-window system for businesses to obtain various permits, licenses, and approvals required to start and operate in India. It aims to simplify the regulatory environment and improve the ease of doing business.

Shram Suvidha Portal: This portal facilitates compliance with labor laws by enabling businesses to register and submit various labor-related documents online. It streamlines processes related to labor inspections, compliance filings, and transparency in labor-related information.

e-Sanchit: An online platform that allows businesses to submit trade-related documents electronically, thereby simplifying the process of customs clearance and reducing paperwork and processing time.

Employee State Insurance Corporation (ESIC): ESIC provides social security benefits to employees and their dependents in India. The corporation has introduced various digital services such as online registration of employers, electronic payment of contributions, and online issuance of insurance cards to improve efficiency and accessibility.

These digital governance initiatives demonstrate the government's commitment to leveraging technology to enhance transparency, efficiency, and ease of doing business in India.

Conclusions

India's status as a developing nation with a young population indeed makes it an attractive market for investment and setting up manufacturing companies. The combination of a large consumer base and a growing workforce presents numerous opportunities for businesses looking to expand their operations. Additionally, India's economic reforms and government initiatives aimed at promoting investment further enhance its appeal to both domestic and international investors.

Improving India's ranking in the Ease of Doing Business index is a key priority for the government to attract more investment and promote economic growth. To achieve this goal, several areas require attention and reform, including:

Enforcing Contracts or Dispute Resolution: India takes 1445 days to enforce a contract while Singapore and Korea only take 164 and 290 days to do so respectively.

Registering Property: India ranked at 166 in respect of registering property, which needs significant efforts to improve.

Paying Taxes: India ranked at 121 in 2019, which requires improvement.

Resolving Insolvency: India’s rank is 108 in respect of resolving insolvency, which needs to improve to facilitate a more business-friendly environment.

Apart from these, there are also many major challenges that need to be addressed to create a friendly business environment:

• Creating demand to get out of the slowdown caused by COVID-19.
• Reviewing the Companies Act to minimize the criminalization of violations.
• Revamping the Commercial Courts Act for the quick disposal of commercial cases.
• Strengthening and stabilizing GST.
• Simplifying taxation laws.

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Refrences

https://archive.doingbusiness.org/en/about-us

https://indianembassynetherlands.gov.in/page/ease-of-doing- business-in-india/

https://indianembassynetherlands.gov.in/page/ease-of-doing- business-in-india/

https://indianembassynetherlands.gov.in/page/ease-of-doing- business-in-india/

http://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2019-report_web-version.pdf

http://www.worldbank.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2019-report_web-version.pdf

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