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‘Ease of doing business’ refers to the regulatory environment in a country to set up and operate a business. Every year, the World Bank compares the business environment in 190 countries in its Ease of Doing Business Report.
In its report released on Tuesday, 31 October, India’s rank improved to 100 out of 190 countries in 2017, ranking 30 positions higher than the previous year.
In this context, we explain the parameters on which each country is ranked, what has led to India’s improvement in rankings, and some recommendations made by committees to further improve the business environment in the country.
The ease of doing business rankings are based on a country’s performance on 10 parameters such as enforcing contracts and starting a business.
India’s ranking improved in six out of the 10 parameters over the previous year, while it remained the same or fell in the remaining four.
Note that these parameters are regulated by different agencies across the three tiers of government (ie, Central, state, and municipal).
For example, for starting a business, registration and other clearances are granted by central ministries such as Finance and Corporate Affairs. Electricity and water connections for a business are granted by the state electricity and water boards. The municipal corporations grant building permits and various other no-objection certificates.
According to the 2017 report, India introduced changes in some of these parameters, which helped in improving its ranking. Some of these changes include:
Over the last few years, various committees, such as an Expert Committee, constituted by the Department of Industrial Policy and Promotion and the Standing Committee of Commerce, have studied the the regulatory requirements for starting a business in India and the made recommendations on the ease of doing business. Some of the issues and recommendations made by these committees are as follows.
The Standing Committee observed that regulations and procedures for starting a business are time-consuming. As a consequence, a large number of start-ups are moving out of India and setting base in countries like Singapore where such procedures are easier.
The emphasised on the need to streamline regulations to give businesses in India a boost. Note that the government announced the ‘Start-up India Action Plan’ in January 2016. The 19-point plan identified steps to simplify the process for registering and operating start-ups. It also proposed to grant tax exemptions to these businesses.
Under the current legal framework, there are delays in acquiring land and getting necessary permissions to use it. These delays are on account of multiple reasons, including the availability of suitable land and disputes related to land titles. It has been noted that land titles in India are unclear due to various reasons, including legacy of the Zamindari system, gaps in the legal framework, and poor administration of land records.
The Standing Committee observed that the process of updating and digitising land records has been going on for three decades. It recommended that this process should be completed at the earliest. The digitised records would assist in removing ambiguity in land titles and help in its smooth transfer.
Several states have taken steps to improve regulations related to land and transfer of property. These steps include integration of land records and land registration by Andhra Pradesh and Gujarat, and the passage of a law to certify land titles in urban areas by Rajasthan. The Committee also recommended creating a single window for registration of property, to reduce delays.
In India, obtaining construction permits involves multiple procedures and is time consuming. The Standing Committee had observed that it took 33 procedures (such as getting no-objection certificates from individual departments) over 192 days to obtain a construction permit in India.
On the other hand, obtaining a similar permit in Singapore involved 10 procedures and took 26 days.
The Standing Committee had noted that the tax administration in India was complex, and arbitration proceedings were time-consuming.
The Committee observed that for ‘Make in India’ to succeed, there is a need for a fair, judicious, and stable tax administration in the country.
Enforcing contracts requires the involvement of the judicial system. The time taken to enforce contracts in India is long. For instance, the Standing Committee noted that it took close to four years in India for enforcing contracts.
On the other hand, it took less than six months for contract enforcement in Singapore. This may be due to various reasons, including complex litigation procedures, confusion related to jurisdiction of courts and high existing pendency of cases.
The Standing Committee recommended that an alternative dispute resolution mechanism and fast track courts should be set up to expedite disposal of contract enforcement cases. It suggested that efforts should be made to limit adjournments to exceptional circumstances only. It also recommended that certified practitioners should be created to assist dispute resolution.
(This story was originally published on PRS Legislative)
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