India vaults to 63rd in ease of doing business rankings

The sharp rise in India’s ranking underscores the reformist credentials of the Narendra Modi-led National Democratic Alliance government and may help the country attract multinational companies looking for alternative investment destinations to China amid Beijing’s ongoing trade war with the US.

“I am extremely happy that this kind of an upward movement has happened. But of course, we have to touch 50 as has been our target. So, all efforts from this year will be moving in that direction," said finance minister Nirmala Sitharaman.

Last year, India jumped 23 places to reach the 77th position. Ever since the Modi government first came to power, India’s ranking has improved 79 places from 142nd in 2014 to 63rd in 2019, a record for a major economy.

Beginning 2020, the World Bank will expand its ease of doing business survey to two more cities—Bengaluru and Kolkata—in addition to Delhi and Mumbai that are currently surveyed. In a change of methodology, the World Bank has decided to have four cities from every country with a population above 100 million. Apart from India, the US and China will have two more cities included in the ranking next year.

In the latest World Bank rankings, India also surpassed Vietnam, which dropped a notch to 70. Vietnam has been a major beneficiary of the US-China trade war, with many companies shifting their base to that country.

Gautam Mehra, partner at PwC India, said yet another year of improvement in the Doing Business ranking, coupled with the recent corporate tax rate reduction, augurs well for business. “It’s a clear indication that efforts made by the government have helped boost investor confidence."

Cyril Shroff, managing partner at law firm Cyril Amarchand Mangaldas, said that for the improvement in ranking to translate into massive investments, Indian policymakers need to focus on boosting the confidence of global investors, which can happen only if India can define an investment ideology with long-term policy road maps for key sectors and the overall economy. “Unexpected policy changes impact underlying investment logic and upset foreign investors; overall, I am positive that we are on the right track," he added.

Sitharaman on Saturday said she would soon prepare a plan to woo multinational companies seeking to shift production from China because of trade tensions.

The World Bank in its latest report said India undertook four major reforms in the 12-month period to 1 May. “Among other improvements, India made the process of obtaining a building permit more efficient. Obtaining all permits and authorizations to build a warehouse now costs 4% of the warehouse value, down from 5.7% the previous year. In addition, authorities enhanced building quality control in Delhi by strengthening professional certification requirements. Importing and exporting also became easier for companies with the creation of a single electronic platform for trade stakeholders, upgrades to port infrastructure and improvements to electronic submission of documents," it said.

India saw the biggest jump in ranking in the “resolving insolvency" category from 108th to 52nd on the back of the government implementing the Insolvency and Bankruptcy Code. Its ranking improved substantially in “dealing with construction permits" (from 52nd to 27th) and “trading across borders" (from 80th to 68th).

Compared to last year, India’s ranking deteriorated on two parameters—“protecting minority investors" (from 7th to 13th position) and “getting credit" (from 22nd to 25th)—and remained unchanged in “enforcing contracts" at 163rd. On all three parameters, India’s score remained unchanged, indicating no reforms were recorded by the World Bank. India’s ranking improved in “registering property" from 166th to 154th despite a drop in score.