Ease of Doing Business: A work in progress

September 2, 2020 6:00 AM

Coupled with steadfast focus on execution and institutional reforms, the EoDB programme should catapult India into the league of nations with a robust business ecosystem that attracts and fosters the most innovative enterprises from across the world

World Bank DB ranking improvement from 142 to 63, in some ways, reflects these on-ground changes.World Bank DB ranking improvement from 142 to 63, in some ways, reflects these on-ground changes.

By Rajiv Memani

As the debate rages on World Bank’s Ease of Doing Business’s recent reports and the scepticism around Doing Business rankings of nations, it is noteworthy to consider the context, achievements and challenges in addressing one of the most important ask of the business community and raising India’s attractiveness for foreign investors.

India’s billion-plus people with immense economic diversity, the sheer size of some of the states and a lack of consistency in interpretations and implementations of myriad regulations have played a complex role in quashing past efforts to revolutionise a deeply entrenched business ecosystem. The government’s Ease of Doing Business (EoDB) agenda, launched in 2015, was perhaps focused on addressing these systemic issues through transformative reforms in four dimensions—the Doing Business for country-level ranking, state-level reforms, reforms at the district level and the (forthcoming) measures to reduce the cost of doing business.

We surely haven’t reached our destination, but over the last five years, significant progress has been made in the form of realising process efficiencies and integration of services on single window platforms. World Bank DB ranking improvement from 142 to 63, in some ways, reflects these on-ground changes. For example, person-days required for setting up a business has come down from 28 days to 18 days. The accompanying table shows improvements in several such parameters, which the World Bank index measures based on user feedback.

Digitalisation and use of technology have been important levers of change. The state-level online single window systems trigger automation of various concerned departments for providing online approvals related to labour, factories, boiler, construction permit, electric connection, fire NOC, taxation, right of way, property registration, drug manufacturing and pollution control boards. Various technology platforms of central and state governments are now talking to each other on a real-time basis and facilitating approvals. As part of Business Reform Action Plan (BRAP), most states have brought transparency in land records and automated systems to a significant level.

To cite Mumbai’s example, digitisation of transaction deeds and records of rights data of multiple decades as well as complete digitisation of cadastral maps has enabled better registration-mutation database, bringing down resolution time of land disputes to less than a year. Similarly, e-filing of initial complaints has reduced average time to dispose off commercial dispute cases in Delhi to as low as 30-60 days in many courts.

Launched with active support from states to cover a wide range of issues to build long-term health of the business environment, BRAP has also brought in competitive federalism and transparency. It aims to reduce the bureaucratic discretion by bringing objectivity in the regulatory processes. Now, in a big policy shift, the government has charted a roadmap to undertake business reforms at the district level to engage district and local government bodies in the governance process. If implemented right, these reforms can play a crucial role in further advancing the EoDB agenda.

The government has so far been responsive to business and is making expansive efforts to improve the overall ecosystem. However, as some of the systemic issues are being dealt with, speed of execution and institutional strengthening remain unaddressed. By and large, the mindset of people in-charge have not kept pace with the government’s vision. Shifting attitudes, both in government and in the industry, through an integrated vision, policies, systems and processes will be key to making a step change.

Laws governing the investment climate need to enable business and enhance competitiveness. While the efforts to simplify numerous laws and de-criminalise some of them are positive, structuring laws toward efficient governance, productivity improvement, business continuity and less complexity while ensuring public good are critical for sustainable results.

Technology can play a much greater role in ironing out system inefficiencies and integrating related services on national and states’ single window systems. Using unique ID for businesses at all regulatory touchpoints can also be considered.

The next big milestone will be a reduced cost of doing business through lower regulatory burden and management of factors of production. While the National Infrastructure Pipeline is a step in the right direction to reduce logistics costs and improve infrastructure, reducing the cost of land, power, and capital can significantly ease the burden for businesses. Faster implementation of these initiatives will help India consolidate its location-product matrix and realise its potential in high value-add segment.

Just as numerous reforms on the tax side such as GST, Faceless Assessment Scheme and digitalisation of the tax administration, which promise long-term benefits, have caused temporary pain, the current measures toward ease of doing business too are work in progress. Coupled with steadfast focus on execution and institutional reforms, the EoDB programme should catapult India into the league of nations with a robust business ecosystem that attracts and fosters most innovative enterprises from across the world.

The author is Chairman & CEO, EY India. Views are personal

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