India Turns Business-Friendlier Than Last Year; Still Behind Nepal, Bhutan & Sri Lanka

Earlier this month, PM Narendra Modi visited Silicon Valley promoting India as a valuable investment destination for the tech majors. As an economy, India continues to grow, bracing against global meltdown, it is yet to bring about change in its reputation and become an investment-friendly country; thanks to the rampant prevalence of corruption, bureaucracy and crony capitalism. But we see a light at the end of the tunnel and things are changing as we move up the ranks in business-friendliness.

According to the latest World Bank report on ‘Ease Of Doing Business’, India is ranked at 130th out of 189 countries, almost 12 positions higher than June 2014, when it was ranked at 142. The report also states that it now takes 29 days to start a business in India, as compared to 127 days in 2014.

The global ranking rated Singapore for having most conducive regulatory environment for investment followed by New Zealand and Denmark on the second and third rank respectively.

This year, India introduced two major business-friendly reforms:

Facilitating company incorporation: India removed the minimum capital and certificate requirement for starting a business. Last year, the registration fees was reduced but it was mandated to file a declaration.
Facilitating electricity connection registration: Earlier, a new connection required internal wiring inspection by the Electrical Inspectorate, especially in Delhi. Last year, there were some reforms like reduction in security deposit for obtaining a connection. But the government further improved upon the entire process by automating some of the internal processes making it simple and faster.

Every year, World Bank releases the ranking on Ease of doing business, it ranks global economies from 1 to 189. It gauges the regulatory environment for business operations in each country based on ten parameters.

The ranking is the simple average of the percentile rankings on following aspects:

Starting a business
Dealing with construction permits
Getting Electricity
Registering property
Getting credit
Protecting minority investment
Paying Taxes
Trading across borders
Enforcing contracts
Resolving insolvency

Among these, India was ranked the lowest in dealing with construction permits at 183 rank.

Other countries that were ranked ahead of India were Malaysia (18), France (27th), Japan (34th), United Arab Emirates (31st), Thailand (49th) and China (84th). Among the South Asian countries, smaller neighbouring countries like Bhutan, Nepal, Sri Lanka and Maldives were cited as more friendly than India. However, the ranking considered only Delhi and Mumbai for benchmarking against the global standard, ignoring many other major cities like Bangalore, the startup hub of the country.

PM Narendra Modi, has been pushing various reforms to take India to the top 100 in the next ranking. In recent days, the government has taken a number of steps to further improve the ranking. “I am trying to make the Income Tax Act much simpler. Yesterday I have announced a Committee which will recast some of these provisions.”

The industry has been looking upon the government for reform for many years. Within the startups ecosystem, there have been concerns about Government’s aid towards reforms. “It should ease and simplify rules and processes in new companies act. Some are from the draconian era. There is intent, but they are still far away from promoting it,” said K Ganesh, angel investor and founder & CEO at Growth Story, in an interview with INC42. “We keep talking about the ‘Startup India’ slogan, but today it is just 2% of what it should be. There is 98% more work to be done,” he added.

Earlier, according to PTI, the government cleared two ordinances for speedy settlement of commercial disputes in the country. The Union Cabinet cleared ordinances to amend the Arbitration and Conciliation Act and bring into force the Commercial Courts, Commercial Division and Commercial Appellate Division. It also announced to set up a committee for removing complications in the Companies Act.

Last month, Ministry for Micro, Small and Medium Enterprises (MSME) introduced a simplified process for registering a new business. This new form called Udyog Aadhaar was issued on September 18 and currently, it has more than 800 new businesses registered on it. But the department has made it mandatory for the entrepreneurs to submit their Aadhaar number in order to register their business.

Under Modi’s mandate, the Department of Industrial Policy and Promotion (DIPP) announced a framework to assess and rank states in terms of ease of doing business. It is also working on a new startup policy to nurture the budding startup ecosystem in the country.