If the Narendra Modi government is able to get its focus right on 3 key areas, come 2018, India may very well perform better than China in the World Bank 'Ease of Doing Business' Rankings as well!
Ease of doing business 2018: A comparison between India and China is inevitable, especially given the fact that India has beaten China to become the fastest growing economy in the world. And, if the Narendra Modi government is able to get its focus right on 3 key areas, come 2018, India may very well perform better than China in the World Bank ‘Ease of Doing Business’ Rankings as well!
India has emerged an outperformer in World Bank’s ‘Ease of Doing Business’ rankings this year. Scoring a ‘century’, India has jumped a whopping 30 places to bag the 100th position in a research that ranks 190 countries. PM Narendra Modi has often highlighted his government’s aim to break into the top 50 league of countries for doing business, and this jump to 100 would come as a big boost for him, especially at a time when economic growth and reforms are being questioned.
China, on the other hand, has maintained its ranking of 78 from 2017. The gap between 78 and 100 may seem small, yet is not easy to bridge. For one, the rankings are competitive, which means that not only does India have to put in efforts in several of the 10 areas that World Bank assesses, but also has to be seen doing better than other countries.
Ease of doing business 2018: How China and India stack up
World Bank releases its annual report ranking countries on 10 parameters to come up with the final ranking. These are: 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. As the table below suggests, India already ranks better than China in 4 out of 10 the parameters. To break into the list of top 50 nations, and beat China, India should focus on the following three areas on priority:
1. Registering property: The total number of procedures to register a property in China is 4, whereas in India it doubles to 8! Not only that, on average it take 19.5 days to register a property in China, but 53 days in India! For 2017, India’s ranking was 138, and has seen a further decline to a disturbing 154. In fact in for 2015, the rank was 121, and declined to 138. This is one aspect that requires immediate attention of the respective authorities and government.
Ease of doing business 2018: Detailed analysis of India’s rankings
2. Enforcing contracts: World Bank notes that “India made enforcing contracts easier by introducing the National Judicial Data Grid, which makes it possible to generate case management reports on local courts. This reform applies to both Delhi and Mumbai.” However, in China, which ranks 5 on this indicator, it takes just 496 days to enforce contracts. In India, this figure is as bad as 1,445 days!
Ease of doing business 2018: Detailed analysis of China’s rankings
3. Resolving insolvency: India has made huge and noteworthy progress on this parameter. From a rank of 136 to 103, a jump of 33 is difficult to ignore. “India made resolving insolvency easier by adopting a new insolvency and bankruptcy code that introduced a reorganization procedure for corporate debtors and facilitated continuation of the debtor’s business during insolvency proceedings. This reform applies to both Delhi and Mumbai,” says World Bank. China, however is at 56. For example, it takes an average of 1.7 years to resolve insolvency in China. In India this time period is 4.3 years!
Another important area in which both India and China rank poorly is ‘dealing with construction permits’. This year World Bank has noted India’s efforts to improve procedures. “India reduced the number of procedures and time required to obtain a building permit by implementing an online system that has streamlined the process at the Municipality of New Delhi and Municipality of Greater Mumbai,” says World Bank. Nevertheless, at 181, a lot more still needs to be done to resolve issues faced by businesses in this area.
India has traditionally been seen as a country which is not friendly for domestic and foreign investors. Regulatory hurdles and red tape are seen as the common problems that plague the system. The government’s target of breaking into the list of top 50 countries is ambitious, yet achievable if it gets its priorities right on the areas mentioned above.