Ease of Doing Business – India’s Ranking & Reforms
🟠 Topic 74: Ease of Doing Business – India’s Ranking & Reforms
📌 Introduction
Ease of Doing Business (EoDB) refers to the regulatory and institutional framework that makes it easier for businesses to start, operate, and expand within a country. The World Bank’s Ease of Doing Business Index (discontinued in 2021) was the global benchmark used to assess the business environment across 190 countries. India’s significant improvement in rankings (from 142 in 2014 to 63 in 2020) reflected the government’s focused reforms to simplify business processes, enhance transparency, and improve investor confidence.
🔹 What is Ease of Doing Business (EoDB)?
📖 Definition
Ease of Doing Business refers to the business-friendly regulatory environment, ease of complying with legal and procedural requirements, and the overall ease with which businesses can set up, operate, and exit in a country.
Key Factors Influencing EoDB
✔️ Simplification of procedures.
✔️ Speedy approvals and clearances.
✔️ Efficient dispute resolution mechanisms.
✔️ Transparency in regulations.
✔️ Reduced compliance burden.
✔️ Digital governance and automation.
🔹 World Bank’s Ease of Doing Business Index (2004-2021)
📖 Structure
The World Bank’s EoDB Index ranked 190 countries based on:
| Parameter | Weightage (%) |
|---|---|
| Starting a Business | 11.1% |
| Dealing with Construction Permits | 11.1% |
| Getting Electricity | 11.1% |
| Registering Property | 11.1% |
| Getting Credit | 11.1% |
| Protecting Minority Investors | 11.1% |
| Paying Taxes | 11.1% |
| Trading Across Borders | 11.1% |
| Enforcing Contracts | 11.1% |
| Resolving Insolvency | 11.1% |
India’s Performance (2014-2020)
| Year | India’s Rank |
|---|---|
| 2014 | 142 |
| 2016 | 130 |
| 2018 | 77 |
| 2020 | 63 |
✅ The dramatic improvement was due to targeted reforms in key areas like starting a business, construction permits, insolvency, and trading across borders.
🔹 Key EoDB Reforms in India
1️⃣ Starting a Business
✔️ Integrated portal (MCA21) for online registration.
✔️ Deemed approval for GST and PAN during registration.
✔️ Simplified SPICe+ Form for company incorporation.
⏩ Result: Start-up process reduced from 30+ days (2014) to 5-7 days (2023).
2️⃣ Construction Permits
✔️ Single-window clearance systems in major cities.
✔️ Online building approval systems with real-time tracking.
✔️ Clear timelines for approvals.
⏩ Result: Approval time reduced from 185 days (2014) to ~90 days (2020).
3️⃣ Trading Across Borders
✔️ Digitalisation of customs processes (ICEGATE).
✔️ Risk-based inspections (RMS) replacing 100% physical checks.
✔️ Electronic bills of entry and shipping bills.
⏩ Result: Average export clearance time reduced from 85 hours (2014) to ~25 hours (2020).
4️⃣ Resolving Insolvency
✔️ Introduction of the Insolvency and Bankruptcy Code (IBC), 2016.
✔️ Time-bound corporate insolvency process (330 days max).
✔️ Role of Insolvency Professionals (IP) to manage stressed companies.
⏩ Result: Recovery rate improved from 26% to ~42%.
5️⃣ Paying Taxes
✔️ Introduction of Goods and Services Tax (GST), replacing multiple taxes.
✔️ Online tax payments and filing via GSTN portal.
✔️ Pre-filled returns and simplified filing for small taxpayers.
⏩ Result: Time spent on tax compliance reduced by over 100 hours per year.
6️⃣ Access to Credit
✔️ Strengthened credit bureau coverage (CIBIL, Experian).
✔️ Improved access to collateral-free loans for MSMEs via MUDRA scheme.
✔️ Introduction of Udyam portal to register MSMEs and link them to credit facilities.
⏩ Result: India improved significantly in credit access rankings.
7️⃣ Enforcing Contracts
✔️ Dedicated commercial courts in major cities.
✔️ Online case management systems with e-filing, e-summons.
✔️ Model contract templates for commercial agreements.
⏩ Result: Case disposal times reduced by 15-20% in pilot cities.
8️⃣ Protecting Minority Investors
✔️ Enhanced disclosure requirements for listed companies.
✔️ Mandatory independent directors and audit committees.
✔️ SEBI Listing Obligations and Disclosure Requirements (LODR) regulations strengthened.
⏩ Result: Higher protection for minority shareholders.
🔹 Role of DPIIT – Ease of Doing Business Division
- Department for Promotion of Industry and Internal Trade (DPIIT) coordinates EoDB reforms.
- Business Reform Action Plan (BRAP) assesses states’ performance.
- States ranked on implementation of 300+ EoDB reforms.
Top Performing States (2023 BRAP Rankings)
| Rank | State |
|---|---|
| 1 | Andhra Pradesh |
| 2 | Gujarat |
| 3 | Haryana |
| 4 | Telangana |
| 5 | Tamil Nadu |
✅ Competition between states drives faster reforms and investor-friendly climate.
🔹 Impact of EoDB Reforms
| Indicator | 2014 | 2023 |
|---|---|---|
| FDI Inflows | $30 billion | $70 billion |
| Time to Start Business | 30+ days | 5-7 days |
| Tax Compliance Hours (Annual) | 254 hours | ~140 hours |
| Average Insolvency Recovery Rate | 26% | 42% |
Case Study – Start-up India and EoDB
- Simplified processes for: ✔️ Start-up registration.
✔️ Self-certification under labour & environment laws.
✔️ Tax exemptions. - India now ranks among top 3 global start-up ecosystems.
🔹 Challenges in EoDB Reforms
1️⃣ Implementation Gap
- Many states lag in implementing central-level reforms.
- Last-mile procedural delays still exist.
2️⃣ Judicial Delays
- Contract enforcement still takes over 3 years in many cases.
- High pendency in commercial courts.
3️⃣ Land and Labour Issues
- Land acquisition remains a major hurdle, especially for manufacturing units.
- Labour laws reforms face political resistance in several states.
4️⃣ Regulatory Uncertainty
- Frequent changes in tax rules, investment caps, environmental clearances impact investor confidence.
📚 Practice MCQ
1️⃣ Which government body is responsible for coordinating Ease of Doing Business reforms in India?
✅ Options:
(a) Ministry of Finance
(b) DPIIT
(c) SEBI
(d) NITI Aayog
2️⃣ Which legislation has improved insolvency resolution in India, contributing to Ease of Doing Business reforms?
✅ Options:
(a) SARFAESI Act
(b) Companies Act 2013
(c) Insolvency and Bankruptcy Code (IBC)
(d) Competition Act 2002
3️⃣ Which state ranked first in Business Reform Action Plan (BRAP) 2023?
✅ Options:
(a) Gujarat
(b) Tamil Nadu
(c) Andhra Pradesh
(d) Karnataka
