Ease of Doing Business Ranking

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TOPIC: General Studies 3

• Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

In News: Ease of Doing Business (EODB) is a joint initiative by the Department for Promotion of Industries and Internal Trade (DPIIT) and the World Bank to improve the overall business environment in the States. These rankings represent the ease of doing business in the State with increased transparency, efficiency and effectiveness of the government regulatory functions vis-a-vis the business enterprises.

• The EODB initiatives to enable conducive business environment in the State ranged from reforms in development of online systems, enhancing transparency to regulating inspections covering entire life-cycle of business.
• The Business Reform Action Plan 2019 released by DPIIT contains a list of 80 reforms (187 reform action points) to be implemented by 19 State departments and Andhra Pradesh had achieved 100% compliance.

State Rankings

• Andhra Pradesh, followed by Uttar Pradesh and Telangana, topped the national ranking on ease of doing business ranking released by the Department for Promotion of Industry and Internal Trade.
• While Andhra Pradesh retained its ace position for the third year in a row, Uttar Pradesh emerged as the top performer in northern region after it climbed 10 places over its 2018 position, shows the ranking which is based on implementation of the Business Reform Action Plan for Atmanirbhar Bharat.
• Gujarat, consistently ranked the best in the last four rankings, stood at No. 10.

The state of UP

• Uttar Pradesh made its entry into the top ranks of states that have become better destinations to do business in 2019, jumping 10 positions to displace Telangana as the second best performer.
• As part of this year’s parameters, UP implemented 186 out of 187 reforms suggested by Centre.
• The state rose up the ranks based on its ability to better implement a range of reforms ranging from single-window clearances to easier access to information. Factoring in user feedback to check progress on reforms was a key change in the methodology this year and some states that slipped attributed their low ranks to that.
• Digitalisation played a great role in Uttar Pradesh up ranking and ease of doing business. UP government launched ‘Nivesh Mitra’ e-portal to facilitate various business process. In the last two years 94% of the 2.3 lakhs No Objection Certificates (NOC) applications were processed through the portal.
• The Nivesh Mitra portal resolved 985 of 18120 grievances received.

The World Bank’s decision to halt its annual ‘Doing Business’ report on data authenticity issues has major implications on India

India has sought to improve its ease of doing business index ranking, as a means to attract investments to achieve the targets set for ‘Make in India’, that was announced in 2014. The initiative aims at: raising the manufacturing sector’s share in GDP to 25% (from 16-17% per cent) and creating 100 million additional jobs in the manufacturing sector by 2022. India’s success in boosting its ease of doing business ranking is spectacular, to 63rd rank in 2019, up from the 142nd position in 2014. Policymakers celebrated it to signal India’s commitment to “minimum government and maximum governance”.

The World Bank decision to audit the ‘Doing Business’ report for the last five years may soon cause discomfort by shining a spotlight on the sharp rise in India’s ranking. In fact, in January 2018, Justin Sandefur and Divyanshi Wadhwa’s study at the Center for Global Development found that the improvement in India’s ranking was almost entirely due to methodological changes.

The reality – The share of the manufacturing sector has stagnated at around 16-17% of GDP, and 3.5 million jobs were lost between 2011-12 and 2017-18. Annual GDP growth rate in manufacturing fell from 13.1% in 2015-16 to zero in 2019-20, as per the National Accounts Statistics. To rub salt in the wound, India’s import dependence on China has shot up, compelling the Prime Minister to announce yet another initiative — Atmanirbhar Bharat.

Must Read: Criticism of WB’s Ease of Doing Business Report

The Way Forward

• 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. 
• The Indian regulatory landscape has 1,536 Acts, more than 69,233 compliances and 6,618 regulatory filings across the Centre and states — an indication that ease of doing business for companies still remains a work-in-progress for India despite an improvement in the rankings.
• 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.

Note: 

Results of Ranking of States: 2019, on support to Startup Ecosystems

The Department for Promotion of Industry and Internal Trade (DPIIT) conducted the second edition of the States’ Startup Ranking Exercise, with the key objective to foster competitiveness and propel States and Union Territories to work proactively towards uplifting the startup ecosystem.  It has been implemented as a capacity development exercise to encourage mutual learning among all states and to provide support in policy formulation and implementation.

The States’ Startup Ranking Framework 2019 has 7 broad reform area, consisting of 30 action points ranging from Institutional Support, Easing Compliances, Relaxation in Public Procurement norms, Incubation support, Seed Funding Support, Venture Funding Support, and Awareness & Outreach. To establish uniformity and ensure standardization in the ranking process, States and UTs have been divided into two groups.

Best Performer: Gujarat

Top Performers: Karnataka + Kerala

Leaders: Bihar + Maharashtra + Odisha + Rajasthan

Connecting the Dots:

1. How do measures of transparency and accountability enhance the ease of doing business? Explain with the help of suitable examples.
2. How does lack of adequate number of forums for dispute resolution affect ease of doing business in India? Analyse. What measures can be taken to address this problem? Suggest.
3. Ease of doing business jump is not an achievement. The milestone and the goals are still afar. Critically examine.