Ease of Doing Business: India
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Changes in laws
2014-17
Rajeev Deshpande & Sidhartha, May 26, 2017: The Times of India
Ambitious sweep of new laws reveals govt's priorities
In its three years in office, the Modi government has scrapped more than a thou sand laws, some dating to the Raj that detailed rules for killing elephants and how to deal with spy pigeons. But the several laws that have been amended and the fresh ones that have been passed reflect the government's intent to quicken the pace of economic change and extend its political constituency to the underprivileged apart from the country's middle classes.
The list is formidable: from GST and the Real Estate Regulation Act, to Benami Transactions Prohibition Act and Undisclosed Foreign Income and Assets Act, to new laws for recovery of debt, insolvency and bankruptcy . These are not laws that merely tinker with the status quo; their impact is expected to be game-changing.
Initially, law-making proved more difficult than may have been anticipated after PM Narendra Modi led the NDA to 336 seats in the Lok Sabha. An unlikely opposition coalition of the Congress, Trinamool, Left, SP and BSP used BJP's lack of majority in the upper House to ensure bills passed by LS were referred to select committees. Important reform legislation like GST marked time.
It took months of hard bargaining and resorting to parliamentary stratagem of terming certain legislations -example, Aadhaar -as money bills, before law-making began to gather pace.
By and by , laws that are expected to significantly alter how business is conducted and politics is practised were passed as BJP consolidated its dominance in state elections after setbacks in Delhi and Bihar in 2015.
With an eye to the political imperative of social equity , the government moved on economic legislation linked to its stated objectives to speed up business. The sweep of legislations has been ambitious, looking to alter both social and economic behaviour. Besides the high-profile new laws mentioned earlier, there have been several others -such as the ones for setting up dedicated commercial benches in court and making the auction of coal and minerals mandatory. The rights of persons with disabilities is now law while the maternity benefits bill is pending approval as is the legislation to grant constitutional status to the national commission for backward classes.
BJP's three-fourth majority in UP and Uttarakhand besides stealing a win from Congress in Manipur and Goa smoothened the passage of four GST-related bills in Parliament's Budget session, after the Rajya Sabha had passed the GST constitutional amendment Bill last August, over two years after the Modi government assumed office.
The laws prioritised by NDA reveal its priorities. Early in its tenure, the government altered the Juvenile Justice Act to provide for teens in the 16-18 age group to be treated as adults in heinous offenses. This was in response to a public outcry over an underage offender in the Nirbhaya gangrape-murder case being given a mild sentence.The government also brought in the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Amendment Act to provide tougher punishment.
If changes in juvenile law point to a tougher line on crime, amendments to the SC and ST act incorporate specific humiliations such as forced tonsuring and denial to water resources. The decision is consistent with BJP's determination to make a mark with Dalit voters and counter the criticism of being a `manuvadi' party . The BJP's Dalit project was hurt by the Rohith Vemula suicide and the Una violence but the party managed to trump its caste-centric opponents in the crucial UP election.
Expansion of the definition of disabilities and the increase in paid maternity leave to 26 weeks from 12 weeks are interventions that will likely force even the private sector to extend similar benefits to their workforce.
Changes in the law allowing women to work in night shifts was another important pro-women step signalling a commitment to a more gender-friendly work regime.
Competitiveness Index, Global
2015
See seven graphics for 2015, and one for 2016.
2016: India jumps 16 places
ii) India vis-à-vis other BRICS countries.
India jumps 16 places in competitiveness index, Sep 28 2016 The Times of India
India jumped 16 places in the World Economic Forum's (WEF) 2016-17 Global Competitiveness Index (GCI) to emerge as the highest rising economy due to improvement in goods market efficiency, business sophistication and innovation.
India was ranked 39 out of 138 countries which were reviewed. This is the second year in a row that the country has climbed 16 places in the ranking, according to WEF.
Switzerland, Singapore and the US remain as the world's most competitive economies. China ranks 28 in the index. Among the other BRICS countries, Russia is ranked 43rd, South Africa at 47, while Brazil declined six notches to end up at 81.
“Thanks to improved monetary and fiscal policies, as well as lower oil prices, the Indian economy has stabilized and now boasts the highest growth among G20 economies,“ according to the GCI report. It measures 12 areas which include institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods and market efficiency , labour market efficiency among others. Economists said the go vernment's push to plug gaps in the economy had helped. “Relative to other economies, the Narendra Modi government has focussed on repair and reform of the economy which is pushing up India's competitiveness,“ said D K Joshi, chief economist at Crisil.“India's ranking in the World Bank's Ease of Doing Business is also likely to go up.“
2017: India drops 1 rank, to 40
Utpal Bhaskar, September 27, 2017: Livemint
India improves on WEF’s global competitiveness rankings
India is at Rank 40 in World Economic Forum’s (WEF) global competitiveness index, the highest in South Asia
India remains the most competitive country in South Asia, appearing at No. 40 in the global competitiveness ranking of 137 countries by the World Economic Forum (WEF). The ranking is one lower than last year’s, but the two rankings are not comparable because of a change in the methodology, WEF said.
WEF said India’s score is its highest ever according to the current methodology, which ranked Switzerland as the world’s most competitive economy. India’s competitiveness has improved, the report said. “Among the emerging markets seen as having great potential in the early 2000s, Brazil and Turkey have now lost much of the ground they gained before 2013, but China, India and Indonesia continue to improve.”
The findings come at a time when India is looking to scale 40 spots to reach the 90th rank in 2017-18 in the World Bank’s ease of doing business survey this year.
The report, however, cautioned against risks from uncertain global economic conditions. “Ten years on from the global financial crisis, the prospects for a sustained economic recovery remain at risk due to a widespread failure on the part of leaders and policymakers to put in place reforms necessary to underpin competitiveness,” WEF said in a statement.
The report remained upbeat about India, which is planning massive funding to bankroll its new infrastructure programme. “India (40th) stabilizes this year after its big leap forward of the previous two years. The score improves across most pillars of competitiveness, particularly infrastructure (66th, up by two), higher education and training (75th, up by six), and technological readiness (107th, up by three), reflecting recent public investments in these areas,” it said.
The WEF lauded India’s efforts in the information and communications technology (ICT) sector. “Performance also improves in ICT indicators, particularly Internet bandwidth per user, mobile phone and broadband subscriptions, and Internet access in schools,” the report added.
This in turn can provide a boost for the internet economy. While the total number of mobile internet users is expected to grow to almost 650 million by 2020, the number of users with high-speed internet access is expected to be around 550 million, according to The Boston Consulting Group. Data consumption is set to expand to around 7-10GB per month per user by 2020 from the current 700MB.
However, concerns remain on doing business. “The private sector still considers corruption to be the most problematic factor for doing business in India,” the report said.
“There is no doubt that there has been improvement in the business environment in India. However, much more needs to be done for the impact of policies to be felt on the ground,” said Sanjaya Baru, secretary general of the Federation of Indian Chambers of Commerce and Industry, a lobby group.
Contracts, enforcement of
Need to amend Commercial Courts Act/ Arbitration, Conciliation Act
See graphic:
Filing a Rs 3-lakh claim in city civil court in Mumbai, time taken, cost and quality of judicial process index, Source-World Bank
The poor track record on enforcement of contracts haunts businesses, with India faring poorly . But the law department is seen to be moving slowly to fix the problem that spans from an agreement to bundle a mobile handset with a tariff plan to contracts between a multinational and a domestic company .
On the World Bank's Ease of Doing Business (EoDB) rankings, where India was ranked a low 130th among 190 countries, it was ranked 170th when it came to enforcing contracts, raising demands for the government to quickly address the concern.
The absence of progress on this front is seen to be detrimental not to the EoDB rankings, due to be released next month, but more importantly to the investment climate as foreign investors often shy away from India, citing the weak legal framework on the issue. After all, to get a verdict of a Rs 3lakh contractual dispute can take almost four years in a civil court in Mumbai. And, if the case goes to higher courts, the wait can be a few years more and by then the cost can be more than the amount involved. It's been months since the task force finalised the report which, among a host of issues, made a case for e-filing and esummons in district courts and ensuring that the number of adjournments are limited so that the number of pending cases comes down. In fact, the large number of adjournments -against the ideal situation of three -is being cited as a major problem area, something that the judiciary has to tackle, sources said.
What is held up due by the law department are amendments to the Commercial Courts Act to explicitly provide for setting up of courts at the district level, which will deal with cases up to Rs 1crore. The government plans to designate five district and city civil courts in Delhi and Mumbai as “commercial courts“ to tackle the problem of cases getting clogged in high courts.
In addition, the government is contemplating either enacting a new law or amending the Arbitration and Conciliation (Amendment) Act, 2015 to provide legal backing to pre-litigation mediation and reduce the number of cases coming to the courts. The view in the task force is that this can done through incentives such as refund of court fee or even some tax rebates, as is the practice in Singapore. The government has also requested high courts in Delhi and Mumbai to implement pre-litigation voluntary mediation for the time being. Sources said the Delhi government's experience has been very favourable as of the 47,000 petty cases, such as disputes involving neighbours and family members, 17,000 cases had been sorted out through this process.
World Bank Report on Doing Business-2017: Enforcing Contracts
The World Bank has been publishing its 'Doing Business Reports' every year since 2002. The Report seeks to measure regulations that enhance business activity and those that constrain it. In the 2017 Report of the World Bank, published in October 2016, India's overall rank has improved marginally from 131 in 2016 to 130 in 2017. The economies have been ranked on 10 broad measurable performance indicators such as time taken to start a business, time taken to get construction permits, paying taxes and enforcement of contracts. BruneiDarussalam, Kazakhstan, Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan the United Arab Emirates, and Bahrain were the most improved economies in 2015/16 in areas tracked by Doing Business.
The following table depicts the change in India's ranking across the different indicators specified in the Report:
|
Topic |
DB 2017 Rank |
DB 2016 Rank |
Change in Rank |
|
Overall |
130 |
131 |
1 |
|
Starting a business |
155 |
151 |
-4 |
|
Construction Permits |
185 |
184 |
-1 |
|
Getting Electricity |
26 |
51 |
25 |
|
Registering Property |
138 |
140 |
2 |
|
Getting Credit |
44 |
42 |
-2 |
|
Protecting Minority Investors |
13 |
10 |
-3 |
|
Paying Taxes |
172 |
172 |
0 |
|
Trading across Borders |
143 |
144 |
1 |
|
Enforcing Contracts |
172 |
178 |
6 |
|
Resolving Insolvency |
136 |
135 |
-1 |
• As can be seen from the table, the biggest improvement in the ranking has been in the 'Getting Electricity' indicator; there has been a 25 points change in the rank, from 51 in 2016 to 26 in 2017.
• There has been improvement in the 'Enforcing Contracts' indicator; i.e. the ranking has improved by 6 points, from 178 in 2016 to 172 in 2017. However, as is evident there is still considerable scope for improvement in the ranking.
• The other two main indicators where there is major scope for improvement is 'paying taxes' and 'construction permits'.
Enforcing Contract indicator
As per the World Bank, the enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court (competent court), and the quality of judicial processes index, evaluating whether the country has adopted a series of good practices that promote quality and efficiency in the court system. The Report highlights some of the major reforms initiated by different countries to make enforcement of contracts easier and more feasible. Some of the reforms mentioned in the Report are:
• Low-income and middle-income economies, predominantly in Sub-Saharan Africa and East Asia, focused their reform efforts on strengthening judicial infrastructures. Cote d'lvoire and Indonesia, for example, introduced dedicated simplified procedures for the resolution of small claims.
• Brunei Darussalam, Hungary, Norway and Spain introduced an electronic system to file initial complaints with the competent court.
• Rwanda implemented the Integrated Electronic Case Management System, a web- based application that integrates five main institutions of the justice sector throughout the courts. Among other features, the system allows for an automatic registration of lawsuits, electronic organization and scheduling of cases and automated claims processing.
• Many economies have concentrated their reform efforts on making complex revisions of their civil procedure laws. Nearly a third of reforms in 2015/16 entailed approvals of entirely new codes of civil procedures. Bolivia, Brazil, Ecuador, Kazakhstan, Niger and the Syrian Arab Republic are among the economies that implemented such reforms.
To assess the enforcement of contract indicator, the World Bank circulated a questionnaire on the basis of a standardised case study. As per the said case study, a seller delivers custom- made goods (the value of the goods is Rs. 3,06,959) to a buyer who refuses delivery, alleging that the goods are of inadequate quality. To enforce the sales agreement, the seller files a claim with a local court, which hears arguments on the merits of the case and the court decides in favour of the seller, and orders the buyer to pay the contract price. For the purpose of the questionnaire, the competent court means the court in Delhi and Mumbai with jurisdiction over commercial disputes similar to the one described in the case study. The questionnaire was circulated to a large number of stakeholders to elicit their views on the different questions primarily relating to the quality of judicial processes.
The quality of judicial processes index covers a set of good practices across four areas, corresponding to the four components of the index: court structure and proceedings, case management, court automation and alternative dispute resolution. The index ranges from 0 to 18, with higher values indicating better and more efficient judicial processes. In the 2016 Report, India's Quality of Judicial Process had an overall score of 7.5 out of 18. In the 2017 Report, the score has improved to 9 out of 18. The following table provides the points assigned to the competent court in Delhi and Mumbai for each of the four components of the Quality of Judicial Process.
|
Quality of Judicial Process (0-18) |
Existing (Delhi and Mumbai (9/18) |
Proposed |
|
Court structure and proceedings (0-5) |
4.5 |
4.5 |
|
Case Management (0-6) |
0.5 |
6 |
|
Court automation (0-4) |
2 |
4 |
|
Alternative Dispute Resolution (0-3) |
2 |
3 |
• As can be seen from the above table, the case management process has scored the least number of points.
• The increase in the points from 7.5 to 9 has primarily been due to the improved scoring in the court structure and proceedings index. Points have been given for the enactment of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 and for the amendment to the Arbitration and Conciliation Act, 1996.
World Bank Observations and Present Status
A. Competent Court and Case Management
The case study provided by the World Bank was for an amount of Rs. 3,06,959 which would fal! within the jurisdiction of the Delhi/Mumbai District Court and not the respective High Courts. Therefore, the measures introduced to streamline commercial disputes under the Commercial Courts Act has had no impact on the indicator's data.
As Delhi and Mumbai High Courts have original jurisdiction, commercial courts have not been established at the district level, rather commercial divisions of the High Courts have been established. In this regard, the High Courts of Delhi and Mumbai are being consulted and inputs from the Department of Legal Affairs has been sought. In this regard, the task force may consider and deliberate upon the following legislative measures.
(a) Amendments to the Code of Civil Procedure, 1908
• The Commercial Courts Act has by virtue of Section 16 read with Schedule 1 of the Act made amendments to the CPC for the purpose of purpose of proceeding with cases falling within the jurisdiction of the Act. These amendments make substantial changes to the CPC such as imposition of costs, disclosure and inspection norms, case management hearing, summary judgement and other provisions for time bound disposal of commercial cases.
• The CPC may be amended to extend the amendments specified in Schedule 1 of the Commercial Courts Act, to the extent necessary and feasible to all civil/commercial litigation in the country irrespective of the value of the dispute. This was also recommended by the Law Commission in its 253th Report on 'Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015'
(b) Amendment to the High Court Rules/Power of the High Court to notify commercial courts at district level for cases below Rs 1 crore
• Section 122 of the CPC empowers the High Courts to frame rules for civil courts. The High Court may designate/notify certain district courts as commercial courts for the purpose of disposal of commercial cases below the value of Rs. 1 crore.
• The High Court may in this regard frame rules of procedure for adjudication of such commercial cases by the district court. The Department Related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice in its 78th Report had recommended the High Courts. should be responsible for laying down its own procedures of case and cost management.
(c) Amendment to the Commercial Court Act to revise the specified value
• Currently, the Commercial Court Act is only applicable to cases amounting to Rs. 1 crore and above. The Act may be amended to revise the amount of specified value.
B. ADR Mechanism
The Enforcing Contract indicator looks at voluntary mediation/conciliation, i.e. in which the parties have an active role and voluntarily decide to initiate mediation. Mandatory mediation as covered Section 89 is not covered by the ADR sub-index of the quality of judicial processes index. Section 89 CPC deals with court referred ADR and the parties have a passive role rather than the active role.
In this regard, the task force may consider whether a standalone law on mediation to give statutory backing to voluntary mediation is required. Case Management and court automation
The World Bank only acknowledges the availability of reports/publications when it can be generated specifically for each court. These reports pertain to (a) age of pending cases report; (b) clearance rate report; (c) time to disposition of a case; and (d) single case progress report. Out of these 4 reports, two reports namely, the age of pending cases report and the single case progress report are available for each court.
The World Bank also observed that though there is a law specifying the maximum number of adjournments that can be granted, the law/rule is respected in less than 50% of the cases. Further, the adjournments are not limited to unforeseen and exceptional circumstances. In this regard, advisory have been issued to the Chief Justices of all High Courts to seek strict enforcement of Order XVII Rule 1 of CPC (which limits the number of adjournments to 3).
The World Bank further observed that there is no electronic case management system for lawyers and judges in the competent court (i.e. the Delhi/Mumbai District Court) and that there is no provision for pre-trial conference. In addition, as the complaints cannot be filed electronically before the competent court and the documents cannot be served electronically, we were not given any points on that front.
As can be seen a majority of the reforms pertain to electronic case management and therefore, successful implementation of these measures will help in improving our rankings.
Conclusion
The Department of Justice has been appointed as the nodal department for the 'Enforcing Contract' parameter. The DoJ is expected to ensure that all necessary reforms are undertaken to ensure that India's ranking in this parameter comes within the top 50 by next year.
Ease of business
Enforcing contracts
May 25 2015
Tedious legal process top hurdle to ease of doing biz
Sidhartha
The Narendra Modi administration's focus on ease of doing business is expected to help India report significant gains when the new rankings are released but enforcing contracts is one area where the government seems to have run up against legal hurdles, resulting in fewerthan-expected moves to simplify the cumbersome process. When it comes to enforcing contracts, India ranked a lowly 186th among 189 countries, with only Angola, Bangladesh and Timor-Leste placed lower.While officials say that the attitudes have a major role to play , experts reckon that the Indian legal process is long and cumbersome. World Bank arm International Finance Corp's Doing Business report measures the efficiency of the judicial system in resolving commercial disputes based on the time taken, the procedures involved and the cost incurred. On an average, it costs almost 40% of the claim, involves some 46 procedures and takes almost four years, 1,420 days to be precise, in Mumbai or Delhi. What's more, the Doing Business report has not recorded a single reform move in India for the last eight years.
As a result, when the government prepared a detailed blueprint for all parameters, eight steps were planned, beginning with commercial courts in Delhi and Mumbai two centres which are studied by IFC team. But apart from the commercial courts and the recent Supreme Court order paving the way for the establishment of the National Company Law Tribunal, things have moved rather slowly . The moves to be initiated include enabling district courts to completely switch over to e-management of commercial cases, which includes e-filing of complaints, e-service of summons and availability of digitally signed judgments on the web. The plan also included sensitizing district courts about exploring mediation, arbitration and conciliation under section 89 of the Code of Civil Procedure.
Similarly , there should be a limited number of adjournments so that cases are decided in a shorter span of time.
Sources in the government acknowledge that there has been little progress on several of the proposals that have been discussed over the past year to improve India's ranking on enforcing contracts. And, it is unlikely that the IFC team misses that, making it tougher for India to make significant gains in the Ease of Doing Business Rankings, sources acknowledged.
2014:India Ranks 142 in the world
Jan 17 2015
Pradeep Thakur
Ranks 142 on bank's ease of doing business list
Large pendency of cases in Indian courts and non-implementation of judicial reforms have been cited by the World Bank as one of the key reasons for India's low rank on the Bank's Index of `Ease of Doing Business'.India was ranked 142 among 189 countries last year. In a memorandum to the department of industrial policy and promotion (DIPP) under the commerce ministry, the World Bank suggested linking judges' appraisal with reduction of pendency in courts.Sources said the matter was discussed at a meeting organized by the DIPP recently to refine the performance evaluation system of judges to link their performance to the resolution of specific bottlenecks as suggested by the World Bank.
The DIPP is also coordinating implementation of the `Make in India' campaign of the Modi government.
Interestingly, the World Bank suggested that there was an urgent need for reforms in the system of performance appraisal of judicial officers in the country to bring about uniformity and infuse objectivity and standardization.
The Bank cited an example from Malaysia where implementation of a reform index for judges improved case disposal rates and reduced backlog by 50% in less than three years. Another exam ple was cited from the United Arab Emirates, where rewards were instituted for the best performers.
According to the memorandum, the liberal grant of adjournments was an often cited reason for delays in court proceedings in India. It recommended monitoring the number of times judges granted adjournments and the reasons for granting them. “This can be done through case management systems and linked to performance management evaluations,“ it said.
It asked the government to ensure that adjournments were not indefinite by setting a time limit.
Just a few weeks ago, the Modi government had written to chief justices of all 24 high courts to ensure speedier settlement of commercial and other disputes for creating a conducive investment climate and success of `Make in India' campaign.
2015: India jumps 12 places
The Times of India, Oct 29 2015
India jumps 12 places in ease of biz
Turns around many years of decline in World Bank's ranking on reforms
India has jumped 12 places in the World Bank's Ease of Doing Business index on the back of reforms undertaken by the government to improve the investment climate. The country ranks 130 out of 189 economies in the world in this year's (2016) report (ranked 142 in Doing Business 2015), marking a significant shift in the trend after several years of decline in ranking. Under the new methodology , its rank has moved to 130 from 134 in the previous year. The Doing Business 2016: Measuring Regulatory Quality and Efficiency , released on Tuesday , captures reforms implemented in 189 countries between June 2, 2014 and June 1, 2015.
In the global ranking stakes, Singapore retains its top spot. Joining it on the list of the top 10 economies with the most business-friendly regulatory environments are New Zealand, in second place; Denmark (3rd), Republic of Korea, Hong Kong SAR, China, UK, US, Sweden, Norway , and Finland. The report comes as a shot in the arm for the government battling to revive growth, attract investment and remove the regulatory and bureaucratic hurdles to business.
The report highlights two reforms that India has imple mented during the past year. It was able to amend the Companies Act in just under six months and made starting a business easier by eliminating the minimum capital requirement and the need to obtain a certificate to commence business operations, saving entrepreneurs an unnecessary procedure and five days' wait time, the World Bank said.
In both Delhi and Mumbai, the process for getting an elec tricity connection was made simpler and faster. “This year's improvement in ranking marks a significant shift in trend after several years of decline. With sustained reforms, India can make signi ficant improvements in its rankings in the next few years,“ said Onno Ruhl, World Bank country director in India.
The report also highlights a number of reforms already underway in India, which were not fully felt by the majority of businesses by June 1, 2015 but will help India further improve its rank in the coming years. In particular, it notes India's efforts to streamline the process of obtaining a construction permit in Mumbai, and new systems for e-filing and e-payment of taxes.
Ongoing efforts to introduce and enact the bankruptcy Code, movement on operationalizing commercial benches and courts in Delhi and Mumbai, efforts to introduce automation in judicial processes in courts, further digitization of land records, and integration of registration and mutation processes, and introduction and launch of National Single Window for trade may also help India improve its rank in future.
2016-17/ India rises 1 place, to 130; trails Nepal, Sri Lanka
The ranks of China, Nepal, Pakistan, Sri Lanka
Ease of business 2016-17 Despite govt's efforts, India still not an easy place for biz Oct 26 2016 : The Times of India
Ranked 130th By IFC, Far Below Top-50 Target
India moved up only one position in the International Finance Corporation's (IFC) ease of doing business rankings, triggering a strong reaction from the government which said the string of reform initiatives undertaken by it in the last one year had not been factored in by the World Bank arm.
PM Narendra Modi has set a target of reaching the top 50 by 2017, a government official told TOI.
The Doing Business 2017 report released on Tuesday showed that India was placed 130th among 190 countries that had been surveyed for the annual rankings, with Russia, Bhutan, South Africa, China, Nepal, Sri Lanka and Brazil ranking higher. New Zealand replaced Singapore as the easiest place for doing business.
While the Centre's focus on improving India's ranking and overhauling the Companies Act was lauded in the report, labour laws were flagged for creating economic distortions even as IFC took note of the plan to overhaul the regime. India's overall score improved marginally to 55.27. India's overall score im proved marginally to 55.27 as it climbed up the rankings for providing electricity connections, enforcing contracts through commercial divisions in Bombay and Delhi High Courts, easier rules for trading across borders and making Employee's Social Insurance Corporation's payments. Improving India's ranking in the ease of doing business survey has been identified as a key priority by the Modi government. The government is keen to improve attractiveness as an investment destination and has undertaken several measures to make it easier to do business in the country.
But it slipped on various other parameters and the government said that at least a dozen steps initiated by it were not recognised by IFC this year, prompting it to put in place a strategy to focus on several reform initiatives in the coming coming year. For instance, the enactment of the Insolvency and Bankruptcy Code was not factored in as the IFC team argued that the law had not been implemented, something that the government now intends to do by December-end. Similarly , it is hoping that GST implementation from April will boost India's ranking at least when it comes to ease of starting business.
“There were several areas where the World Bank team decided to go by feedback it had received although we presented detailed logs to argue that reforms had been implemented... We will continue to engage with the World Bank and address its concerns to include these reforms in next year's report. We will also engage more with stakeholders to get their feedback on the steps we take,“ industrial policy and promotion secretary Ramesh Abhishek said.
For instance, the government said the new process to get a name for incorporating a company took1.86 days but the IFC's feedback showed that it took two-seven days, Abhishek said.
A caveat: Is India's investment climate truly improving?
Is India's investment climate truly improving? The `Doing Business 2017' report of the World Bank shows India improving only marginally from 131st to 130th position among surveyed countries. Meanwhile Assessment of State Imthe industry ministry's ` plementation of Business Reforms 2015-16' claims that implementation of a 340-point reform programme by the states has improved to 48.9% from just 32% the previous year.
Which version should readers believe? Neither.Both reports describe changes in rules rather in practice. The reports cannot capture the role of money and influence to get clearances. Enormous hurdles can vanish with a bribe or telephone call.
The Doing Business report shows India is a difficult place for honest, rule-bound business.But it's not bad at all for businesses that can handle the system. That's why billions of dollars of foreign investment are pouring in even as World Bank ratings show countries like India and China in a poor light.
Critics have long pilloried the shortcomings of the Doing Business report. Yet it has become popular, warts and all, because it captures at least the formal hurdles facing honest business, and promotes competition between countries.
The most devastating expose of its shortcomings came in a World Bank study by HallwardDriemeier and Lant Pritchett. They compared data for a large group of countries from the Doing Business survey with that from a separate Business Enterprise survey, also done by the Bank. They examined three indicators -the time taken for obtaining construction permits, starting a business or operating licence, and the delay in importing goods. They found the average time taken for all three was far less in the Enterprise surveys.
Why? For many technical reasons, but mainly because the Enterprise surveys got data from businessmen across a country , whereas the Doing Business surveys got data from a single city , from lawyers and technocrats familiar with changing rules.So, the Enterprise surveys captured the reality inclusive of bribes and influence, whereas the Doing Business surveys captured changes in rules that would benefit honest, but possibly non-existent, businesses. In India, even reputable firms hire “consultants“ to handle speed money .
The Doing Business report gives a single number for the time taken in clearances. But Hallward-Driemeier and Pritchett found huge variations for different firms: it mattered greatly who your contacts were. The investment climate is not the same for everybody: some can control it, others cannot. The biggest, best-connected firms have a big advantage.
In practice, clearances are faster than rules suggest. The time taken for construction permits in 80 countries was only one-sixth as much in the Enterprise surveys as in the Doing Business surveys.
So, should we ignore surveys on rules and focus only on “realities“? Sorry , but businessmen don't tell the full truth to surveyors about “realities“ either. Still, Enterprise surveys carry more credibility than the Doing Business report.
With the caveats already expressed, the industry ministry's survey of states deserves attention for what it reveals in trends, even if its figures need a generous pinch of salt. This survey looks at 340 changes in laws and rules agreed upon to improve the investment climate. These are more relevant for honest than dishonest business. That does not make them irrelevant. Rules must be changed to make honest business easier. This may not have a revolutionary short-term impact, but is essential for the long term. We need to shift from an influence-based to a rule-based system.
Modi has cut big corruption in New Delhi but it continues at the state level. The survey shows that NDA-ruled states are far more reformist than others, occupying most top rankings. This drives home Modi's strategy to get re-elected by job creation in a vibrant economy , not through giveaways or Hindutva.
The BIMAROU states, once the pits, now figure high in the rankings. This includes BJP-ruled states (Rajasthan, MP , Chhattisgarh, Jharkhand) and nonBJP ones (Bihar, Odisha, UP). Although placed 14th and 16th, UP fulfilled 84.5% and Bihar 75.8% of promised reforms. West Bengal, another laggard, fulfilled 84.2%. It remains to be seen how far changed rules translate into reality . Huge gaps can be expected. Nobody should believe that the states have improved the investment climate fabulously , or that climate control by influential firms has disappeared. Yet the direction of change is positive.
Harvard prof. on what remains to be done/ 2017
Biz environment in India still inefficient, cumbersome: Porter, May 30, 2017: The Times of India
There Is Not Enough Credit In Order To Provide Capital To Good Businesses, Says Faculty At Harvard Business School
M ichael Porter, who is an economist, resear cher, author, advisor, speaker and faculty at Harvard Business School, has brought economic theory and strategy concepts to bear on many of the most challenging problems facing corporations, economies and societies. His work has also achieved remarkable acceptance among practitioners across multiple fields. ET NOW's Sonali Krishna caught up with Porter to discuss some of the challenges the world is currently grappling with. Excerpts:
Would you say that the world economy has recovered from the 2008 financial crisis or are we yet to fully recover and are still reeling in the aftermath?
By and large, it wasn't the problem of the economy , it was really the misalignment and overheating of the financial markets and that took a real toll on everybody . The US got really pounded and indeed alot of that uneasiness has led to Donald Trump getting elected. Trump's presidency really dates back to that financial crisis. People were angry , frustrated and scared and Trump was elected because people didn't think that the existing system was working for them.Ifeel today that financially the US is in a sound position, our banks have record amounts of capital, the financial markets now are working quite efficiently , the borrowing in American households is now a lot more moderated, people are not doing everything on credit anymore, so America is in a different place now.
The concerns now are more ephemeral. There is a lot of fear about globalisation. I don't think there is anything to fear about globalisation but there is a political discourse that's got people upset. I think the biggest problem in America now is Education. We have 20-25% of our people who do not have enough skills for this economy . We have very high unemployment and underemployment in America and that's causing a lot of angst in America as they just don't see any opportunity right now.
On the other hand, in India, the business environment is still very inefficient and cumbersome. There is a financial system in India today where state-owned banks have massive bad loans and there is not enough credit in order to provide capital to the good businesses. So, there's a whole series of weaknesses in the business environment that's holding back the country. The government is trying very hard to whack away at them, they don't have the answers or the whole strategy . The biggest problem we have with America is that we have this political system and a president who is dividing the country . I think in India the greatest problem is that it's going to take decades to clear away all the built-up inefficiency and ineffectiveness and it's going to take a huge effort to invest in the citizens -their education, skills, inclusion, their ability to have a good life.
Let's look at world trends -Brexit, the US Elections or be it the growing populism in several parts of the world. The growing sense of nationalism and jingoism is quite rampant in India as well. What do you think the world is going through where the insecurities of being inclusive seem to be at a record-high and a polarised world seems to be the new normal?
I think we are all feeling that and for a variety of reasons. Fears of trade and the fears of not having any hope in the system in America is causing people to feel intolerant towards immigrants. It's the after-effects of the great recession and it's played itself out and we have never really recovered completely from it. So, people believe that they don't have opportunities and so that's when president Trump started talking about building the walls of Mexico; all that tapped into a very committed group of people who felt that the system wasn't working for them and they were looking for excuses and demons. The truth, however, is that trade is great for America. It provides more jobs, wages in industries that are indulging in trade are much higher than the average industry norm. All the evidence and every economist on the face of the earth will tell you that trade is good and yet people had a sense of insecurity . Britain is another interes ting example. The whole Brexit thing was all about two issues: one is immigrants and the belief that immigrants were coming in and taking their jobs. The other theme of Brexit was that they were getting told what to do by the EU and the guys in Brussels didn't know what Britain nee ded to run their country . The whole thing was complete hogwash! The evidence is very clear -immigrants coming into Britain were not taking jobs of the British people, they are actually creating new jobs. They were entrepreneurs allowing the UK to be competitive in areas that were powering growth in the economy . The places that voted pro-Brexit were in the north but interestingly immigrants don't go in the north they go to the south. Frankly , Brexit was all about lies and what we are seeing in more and more countries is that democracies and political systems have become much more polarised and politicians have tapped into the fear of some people and even framed that fear. Political processes have tapped into the insecurities of nations. It happened in Britain, in America, it's happened elsewhere and so I think that this is a dark period in global economy and in global relations.
2017/ Lack of judicial reforms pulls down India's ranking
A World Bank assessment on the performance of India on ease of doing business shows the largest democracy lags behind many of the sub-Saharan African countries and the east Asian nations in `enforcement of contract' largely due to the inefficient judicial system which has failed to keep up with the technological revolution that has changed the pace of the justice delivery across the world.
Giving the example of Rwanda, it says the African country has implemented the integrated electronic case management system across all courts which allows for an automatic registration of lawsuits, electronic organisation and scheduling of cases and automated claims processing. Many of the sub-Saharan African countries have done better than India, which has failed to implement crucial judicial reforms when it comes to implementing the electronic case management system. Some of the basic services such as summons are still being served using the antiquated practice. The law on adjournments is not followed in 50% of cases across courts while there is hardly any adherence to the timeline fixed for resolution of disputes, as per the findings.
An evaluation of the court structure and proceedings by the World Bank, while ranking countries on ease of doing business in its 2017 report, has painted a very grim picture for India compared to many of the sub-Saharan African countries that have done better by adopting a set of good practices, including case management, court automation and alternative dispute resolution--some of the parameters which resulted in India being ranked overall 130 among 190 countries.
The report refers to lack of electronic case management system for lawyers and judges in the courts dealing with commercial disputes in Delhi and Mumbai. There is no provision for pre-trial conference in these courts. “In addition, as the complaints cannot be filed electronically be fore the competent court and the documents cannot be served electronically , we were not given any points on that front,“ a government task force has observed on why India has been ranked so low in the World Bank's ease of doing business. In India, as far as commercial disputes are concerned, the complaint cannot be filed electronically in the absence of a platform within the competent court.It is not even possible to carry out service of process electronically for claims filed before the court. Only the court fees can be paid electronically and the judgments can be accessed online.
Though there are laws setting time limits for key court events in a civil case but these time standards are seldom followed (not even in 50% of the cases), according to the report of the task force that has analysed the World Bank's assessment.
The low rating of the Indian judicial system is also on account of the unlimited adjournments granted by courts and non-adherence of the prescribed laws by the judiciary itself. There is a law that regulates adjournments where the maximum number that can be granted is limited to three. But the rules of adjournments are followed in less than 50% of the cases, the report said.
The World Bank has rated countries on the judicial indicators with a score ranging between 0 and 18, higher the score better and more efficient the judicial process and system. In the Bank's 2016 report, India had scored an overall of 7.5 out of 18 on its quality of judicial process. This improved marginally to 9 out of 18 in 2017 but that was primarily because of scoring high in `court structure' where it scored 4.5 out of 5. The other indicators such as in the `case management' category , India scored 0.5 out of 6; court automation 2 out of 4 and in the alternate dispute resolution category it scored 2 out of 3.
2017: some improvements, some setbacks
Pradeep Thakur, A thumbs down for ease of doing business, Jun 01 2017: The Times of India
A task force entrusted with improving India's ranking in the World Bank's ease of doing business index is not very optimistic of any drastic change in 2018.
India failed to improve its ranking in the last two years and was placed 130 out of 190 economies surveyed by the Bank in 2017. Starting a business in India is still not an easy proposition. Between 2016 and 2017, India slipped below four countries in the index on the parameter of `starting a business': from 151, it went down to 155 in 2017.Its record worsened in `protecting minority investors' where it was downgraded from the top 10 to 13 in 2017. In `resolving insolvency' category, the country went down a notch, from 135 to 136. The only improvement was on getting electricity connections where India jumped 25 places -from 51in 2016 to 26 in 2017. There was not much change in the ranking on `paying taxes' and in getting `construction permits', according to the report.
The scenario is not very encouraging, according to a preliminary assessment by the task force constituted on the recommendation of a committee of secretaries in December last year to bring the country among the top 50 nations.
The task force, which has held two meetings so far, comprises officials from the department of industrial policy and promotion, law ministry and the registrars of Delhi and Mumbai HCs besides the law secretaries of Delhi and Mumbai. The high-level panel has emphasised on setting up district level commercial courts where disputes of less than Rs 1 crore can be handled. Currently , commercial disputes are only handled by Delhi and Mumbai HCs and the law bars setting up commercial courts at district level.
The panel observed that to “operationalise dedicated commercial benches in Delhi district court and Mumbai city civil court, the proviso to Section 3 (1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 needs to be deleted“.
The World Bank had found India lacking in enforcing contracts, and reducing time and cost involved in resolving commercial disputes through local courts. The quality of judicial processes and efficiency of court systems were some of the reasons responsible for India's dismal ranking on the ease of doing business index.
2017: NITI pinpoints progress yet to be made
A survey on ease of doing business conducted by NITI Aayog and the IDFC Institute, which was released, created a flutter as the results showed that it took companies 118 days to start a business and highlighted other difficulties faced by companies.
The government issued a statement on Tuesday , saying the report itself states that it is meant to be a research document and its contents do not represent views of the government and NITI Aayog.
The survey results varied from the findings of the World Bank's ease of doing business report, which has seen India gradually improve its ran kings. The statement said the survey was conducted between April 2015 and April 2016 and does not reflect any changes in the ease of doing business since then.
In recent years, there has been tremendous progress in easing various processes related to doing business.
This has been verified by the World Bank. It is important to note that the enterprise responses are based on their past experiences and perceptions on doing business, dating as far back as 10 years or more. Reforms such as singlewindow clearance systems would not be applicable to ma ny firms covered in the survey .
“The survey indicates that the government's efforts to improve business environment are showing results on the ground. The experiences of startups, or enterprises started during or after 2014, suggest a significant improvement in doing business over time. Newer and younger firms take less time in obtaining approvals, highlighting a favourable business environment. Young firms report that most regulatory processes do not constitute a major obstacle to their doing business,“ the statement said.
NITI Aayog sources said the survey results showed that in several areas the experience of companies is better than the World Bank survey
States and the ease of doing business
2013: Easiest to start business in Delhi, close in Hyderabad: World Bank
PTI | Oct 30, 2013 [1]
In the 'Ease of Doing Business' ranking of 189 economies, India has dropped from 131 spot to 134 position, while Singapore continues to remain at the top.
WASHINGTON: It is easiest to start a business in New Delhi within India, while Hyderabad is the fastest for closing an enterprise, says a World Bank study.
On the other hand, Kolkata is the toughest place for closing a business among 17 cities, while Bengaluru requires the maximum efforts to start a company, it says.
The city-wise details are part of separate 216-page report by World Bank and International Finance Corporation (IFC) on doing business in India, which was on Tuesday ranked 134th globally in terms of ease of doing business.
According to the report, it requires 32 days for starting a business in New Delhi, while it takes 40 days to register a company in Bengaluru. Besides, a total of 11 procedures (any interaction of the company founders with external parties such as government agencies, lawyers and auditors) is required to register a firm in New Delhi, while 13 procedures need to be followed in case of Bengaluru, the study said.
In terms of ease of doing business within India, New Delhi is followed by Patna, Jaipur, Hyderabad and Bhubaneshwar. When it comes to closing a business, Hyderabad is best place as it takes an average of seven years to wind up an enterprise, while Kolkata is the toughest place for closing a firm by taking an average of 10.8 years.
Among other top five cities, where closing a business is easy are Ludhiana, Mumbai, Ahmedabad and Bhubaneshwar.
In the 'Ease of Doing Business' ranking of 189 economies, India has dropped from 131 spot to 134 position, while Singapore continues to remain at the top.
The rankings are based on various parameters including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
Overall, India's business environment has come for criticism on various issues in the past including in Vodafone tax dispute.
2016: Telangana replaces Andhra at no. 1
Sidhartha, Ease of doing business race hots up among states, Oct 10 2016 : The Times of India
After Bihar & U'khand, Now Telangana At No. 1, Replaces Andhra
The race to decide the easiest state for doing business in India has gone down to the wire.
If the year began with Bihar in the lead, it was Uttarakhand that led the race for the past few months. Now, Telangana is on top, dethroning arch rival Andhra Pradesh. The gap between the two is just one hundredth of a percentage point. On Sunday evening, India's youngest state, Telangana, had a score of 96.98% compared to Andhra's 96.97%.
And last year's winner Gujarat, which dropped to the sixth position just 10 days ago, is now placed third with a score of 94.99% as a World Bank team goes through the last 100 steps taken by Indian states before releasing the rankings. When the rankings were released for the first time last year, states were gauged on 98 parameters for improving the regulatory framework for business. This year, they are being graded on the basis of their performance on 340 parameters -so far the most detailed exercise of its kind.
States were asked to submit the steps they had taken on performance indicators such as ushering in transparency , sing le-window clearances, availability of land, construction permit enablers and environmental registration enablers. Their submissions are still being validated and marks assigned.
“We are taking a little time in releasing the rankings because we want to be sure that the steps that states are claiming to have initiated are properly verified,“ said an officer.
The idea of releasing the rankings -which are dyna mic and available online -is to prod states to move ahead with improving business processes, often a crucial factor in investors choosing where to invest.
States have taken it very seriously , with some hiring consultants to ensure that the steps that are taken do not go waste.
Data shows that Telangana has a positive response on 321 parameters, one more than Andhra but less than Gujarat's 322. In all cases, the maximum number of reform initiatives has come on environment registration enablers. Environment and forest-related clearances were seen as the biggest stumbling block for investors, especially at the state level.
Telangana has taken 27 steps each on easing construction permit related regulations and setting up systems for single-window clearances.
Oct 2016: AP, Telangana top-- DIPP, World Bank
- Andhra Pradesh and Telangana emerged as joint toppers
- Gujarat lost its top slot and was placed third
- Himachal, Tamil Nadu and Delhi were identified as states where acceleration is required.
Andhra, Telangana easiest states to do business
NEW DELHI: Andhra Pradesh and Telangana emerged as joint toppers in the ease of doing business, according to the rankings for states released by the government on Monday, while Gujarat lost its top slot and was placed third.
Telangana and Andhra ended the closely-contested contest with a score of 98.78 per cent on the 340 parameters that states were ranked on.
Chattisgarh retained its fourth position and was followed by Madhya Pradesh, Haryana, Jharkhand, Rajasthan, Uttarakhand and Maharashtra. They were classified as leaders in the rankings by the department if industrial policy and promotion along with the World Bank.
Karnataka, Uttar Pradesh, West Bengal and Bihar were classified as "aspiring leaders", while Himachal, Tamil Nadu and Delhi were identified as states where acceleration is required.
Ease Of Doing Business ranks
(Department of Industrial Police and Promotion and World Bank Report)
1. Andhra Pradesh and Telangana
3. Gujarat
4. Chhattisgarh
5. Madhya Pradesh
6. Haryana
7. Jharkhand
8. Rajasthan
9. Uttrakhand
10. Maharashtra
Financial transparency ratings
2015
The Times of India, Nov 04 2015
Dipak Dash
India betters financial transparency ratings
Jumps 13 spots in 2 years, now at 45th
India has made significant progress in the past two years in financial transparency . According to the global financial secrecy index (FSI) report released by Tax Justice Network (TJN), India ranked 45 in the list of 92 countries in 2015 in comparison to 32 in 2013, which is seen as a big jump. The ranking takes into account the processes put in place to bring transparency and reduce secrecy around financial dealings.
'Innovative' Index
2016
The Times of India, Aug 17, 2016
India has been ranked 66th in a list of most innovative economies, jumping 15 places from last year, according to a new UN report which calls for more transparent policies if the country aspires to become a global driver of innovation.
In the report by the UN World Intellectual Property Organisation (WIPO), India moved up 15 spots from 81st last year to 66th this year in the overall global rankings.
The Global Innovation Index 2016, released by the WIPO, Cornell University, and the multi-nation business graduate school INSEAD, said India ranks among the top 50 economies overall in two pillars: Market sophistication, 33, and Knowledge and technology out-puts, 43.
The country maintains stable or improved rankings across all pillars, with the most significant improvements in Human capital and research, up 40 spots and Busines sophistication, up 59 spots. Within Human capital and research, India data coverage increased, specifically in graduates in sciences and engineering, ranked eighth overall in 2016 while this was a missing value last year, affecting the jump in its ranking. India's ranking in the Business sophistication pillar is affected most by a substantial improvement in Knowledge workers, up 46 spots and Knowledge absorption, up 33 spots.
India also improves in the ranking of firms offering formal training by 56 spots to reach 42nd place. "Furthermore, India improves across all indicators within the Knowledge absorption sub-pillar and it turns in a solid performance in the GII (Global Innovation Index) model's newly incorporated research talent in business enterprise, where it ranks 31st," the report said.
However, India shows weakness in two sub-pillars of business environment, 117th, and education, 118th and within this has potential to improve in the the ease of starting a business and pupil-teacher ratio. "India has all the ingredients needed to become a global driver of innovation: A strong market potential, an excellent talent pool and an underlying culture of frugal innovation. Innovative countries have demonstrated the leverage of their cultural advantage to capture markets," the report said.
Similarly, India can build on its cultural bias of frugality and sustainability to capture markets not only within its shores but globally. "For this to happen India's industries need to have the hunger to be at the top of the value chain, its customers have to be more demanding, its policies have to be more transparent, and its talent pool has to get more hands-on experience while simultaneously growing to leverage the global talent pool," the report said. Stay updated on the go with Times of India News App. Click here to download it for your device.
