Index of Indian Business context
Index of Indian Business context
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Keerthan. K.K
Master in Business Administration, REVA Business School, REVA University, Bangalore, India
E-mail: keerthankeeru2001@gamil.com
Abstract
Purpose:- This small study's aim is to analyze the Indian present business context with the view of the business cycle effect by local government bodies & environment. Also, this paper supports the notion view that, how the future business can stand up in this tough government regulation web.
Methodology / Approach:- This research is based on the detailed literature review of various articles published on Ease Of Doing Business in India(EODB) from 2018-2022. Also, descriptive approaches were used to detail analysis and interpretation.
Findings:- This study identifies the major reforms taken care by government and local authorities to create a positive environment to attract business from foreign countries, with that we also find that India is also one of the top most country to do business from the last 5-10years.
Keywords:-Ease Of Doing Business(EODB), World Bank, Distance to frontier, e-sanchit, Fast track approval system, Fast track corporate insolvency.
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In this business world, business is like a challenging and amazing thing to do, but the platform to take initiative is not that much easy as we imagine to start a new one. In this paper, I would like to cover how the Indexing (Ranking) system work by the World Bank's Ease Of Doing Business (EODB) index, majorly focusing on India's ranking.
Following are the contents I coverded in this research paper.
- Introduction to Ease Of Doing Business (EODB)
- History and objective behind EODB
- EODB ranking on India's Business Climate
- Central government initiatives
- Advantages of EODB index
- Drawback of EODB index
1. Introduction to Ease Of Doing Business (EODB)
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| Source:- Google images |
The Ease Of Doing Business index is a ranking system established by the World Bank group. The EODB index ranking indicates better place/ nation for usually simpler regulations for business, & stronger protection of property rights.
The EODB index report was introduced in 2003 by the World Bank(WB) to provide an assessment of objective measures of business regulations and their enforcement across 190 economies on ten parameters affecting a business through its life cycle.
10 different parameters namely
- Starting a business
- Dealing with construction permits
- Electricity availability
- Property registration
- Credit availability
- Protesting minority investors
- Paying taxes
- Trading across borders
- Contracts Enforcement
- Resolving insolvency
EODB index ranks the countries on the basis of Distance to Frontier(DIF) score that highlights the gap of an economy with respect to global best practices.
Example:- A score of 75% by India is 25% points away from the frontier constructed from the best-performing country(top 1st country) across all economies and across time.
A small introduction to World Bank
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| Source:- Google image |
Later IBRD becomes the World Bank (WB).
Major report of World Bank(WB)
i. Ease of Doing Business (EODB) index
ii. Human Capital Index
iii. World development report
2. History and objective behind EODB
The EODB index report was introduced in 2003 by the World Bank(WB) to provide an assessment of objective measures of business regulations and their enforcement across 190 economies on ten parameters affecting a business through its life cycle.
- In the year 2002 Bulgarian economist Simeon Dyanknov published a paper called The regulation of entry.
- The paper presented data on the regulation of entry of start-up firm in 85 countries covering policy rules and regulations.
This is how Simeon Dyanknov influenced by their research paper, and this become motivated other to take care about countries business environment.
3. EODB ranking on India's Business Climate
EODB index considered 190 countries' economy to ascertain the cost of doing business, in that India ranked on the World Bank as follows.
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| Source:- Insight IAS |
- In the year between 2010-14, India got rank between 131-142nd rank
- In the year 2014, India got 142nd rank
- In the year 2020 India got 63rd rank
As I mentioned early, here we can notice that from the year 2014 to 2020 India gained 79rank. It indicates that India getting easy to start business from last 5-10year.
The future vision of the Prime Minister of India to bring India within the top 50 countries by 2022-30
[Note:- Higher the rank(1st rank), higher the value for start the business
Lower the rank (190th rank), lower the value for start the business]
4. Central government initiatives
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| Source:- Google image |
Now we look into the government initiatives to provide transparency in doing business with the help of 10 parameters that are considered byWorld Bank.
Note:- To make this article brief & easy to read, I only used bullet points instead of long explanations.
i. Starting a business:-
The government made lot of changes to make easy to start a business with the help of providing following facilities.
-Permanent Account Number (PAN), Tax deduction and collection Account Number (TAN), and Director Identification Number (DIN) all are merged to SPICe ( Simplified Performa for Incorporation Company Electrically) in the year 2016 for ease of forming and incorporating companies under the Companies Act 2013.
- Elimination / no incorporation fee for startup with capital up to rupees 15 lakhs.
- Suvidha portal for registration under ESIC & EPFO.
- Eliminate the requirement of a common company seal.
ii. Dealing with construction permits:-
The local government with the help of municipal corporations creates friendly and fast-track approval system, like,
- Municipal corporation of Delhi & Mumbai introduced fast track approval system for building permits.
- Cost of obtaining construction permits was reduced from 23% to 5.4%.
iii. Getting electricity:-
Any business entity's main source of production and operation activities is electricity, yes, here government take precaution with regard to electricity facility as follows,
-Electricity connection is provided within 7 days.
-Service line-cum development charges are now capped at 23000-25000 INR.
-The No. of documents required for getting an electricity connection has been reduced.
iv. Registering property:-
We know that lot of restrictions on property registration in this world of fake real-estate business web, so some advanced level technology is adopted to eliminate those frauds.
-All sub-registered offices have integrated with the land records department.
-Property tax records are been digitized.
v. Credit availability:-
Our thought on bank loans is that it's only available to well-organized businesses / to the person who are familiar with banks, but from last 5-10 years everything is changed.
-Less formality in getting bank loan facility.
-The definition of property which now included immovable as well as intangible.
vi. Protesting investors:-
We all heard about Harshad Mehta's 1992 Indian stock market scam, so every investors may feel back to avoid investment from such losses, for that following solution were founded.
-NSDL & CDSL securities Ltd were established to make every information secure and store.
-Provide capital market regulation rights to the Securities Exchange Board of India (SEBI).
vii. Paying taxes:-
With regard to tax, the following reforms were made.
-Reduction of corporate tax from 30% to 25% for mid-sized companies.
-The tax rate for new domestic manufacturing companies is now @ 15%.
-Introduction of GST on 1st July 2017 subsumed 8 central and 9 state government taxes.
vii. Trading across borders:-
In India, some of the changes were made to International import and export trading they are as follows,
-The Central Board of Excise & Customs (CBEC) has implemented the India Customs single window project to ease trade.
- e-sanchit an online application for filing all documents electronically for import and export.
- Facilitate for Advance import declaration. & so on.
ix. Enforcing contract:-
More than 50% of business transaction happens through contract, so to make it more clear and transparent, government provides facilities as follows,
- The commercial courts & appellate division of the high court have been established in Mumbai & Delhi.
- E-filing of cases has been introduced in every district courts.
x. Resolving insolvency:-
Following facilities are made available to companies.
-Fast-track corporate insolvency resolution process completed within 90days.
Like above mentioned, lot of precaution is taken by the Indian Government with the local bodies to enforce/ create free and easy doing business environment in India.
5. Advantages of EODB index
Ease Of Doing Business index provides detailed information with regard to all conditions in a country from starting to winding up the business. So we can identify the advantages of EODB index from different point of view as follows.
Advantages in view of Business
-Helps to know the best environment to start the business.
-Facilitate FDI from global companies.
-Minimizing the potential risk of doing business.
-Expanding of business globally. etc.
Advantages in view of Government
-To understand where the country stands in global position.
-To decentralize complicated government rules.
-To attract global business.
-To re-creation of investor-friendly policies.
-To attain sustainable growth in environmental protection goals.
-To generate employment opportunities.
6. Drawback of EODB
We noticed lot of advantages through EODB index, even though due to some drawbacks it's very difficult to take decision on EODB index, because of the following reasons.
-Only consideration of few cities for ranking the country.
Example:- In India, Delhi, Mumbai, Bengaluru & few more cities were only take into consideration to do survey.
- Top companies reviews only taken.
Example:- TATA, Reliance, Adani Group & few more well-established businesses.
- Excluding of climate / environmental analysis.
[Note:- In the year 2021 World Bank ended the publication of Business report after probe of data irregularities by china's top bank officials in the 2017 report.
- Irregularities in data provided by Saudi Arabia in EODB index-2020].
Conclusion:-
Now you are definitely thinking that, any report by the local, national, or global entity which are also included lot of wrong data to get name and fame, yes, it's right, even though lot of drawback in EODB report, it helping country's government to take all precaution to facilitate ease place to do business easily.
I would like to conclude about EODB index in my word that,
- Governemt take care in policy making with consideration of global changes and requirement.
- Reduction of restriction to entry new business (Global company / Local company).
- Help is economic growth with majorly focus on employment generation.
- Increase in Make in India & Athmanirbar Bharath motive to reduce dependancy on import & increase self growth of country.
-Motive to companies & startups which come-up with environmental friendly business concept.
Note:- Personal thought on this research
EODB report on India indicates India is also one of the top most country to do business easily, but if we look into the past changes & precautions deeply we may notice that government making changes in policies, rules & regulations in view of getting good reputation in global level without clearly facilitating business. But from now onwords it's necessary to take realistic changes in India to compete in global level by encouraging young entrepeneur with establishing, expanding country brand name.
Bibliography/ Data source:-
- www.worldbank.org
- www.dristiias.com
- www.mankeinindia.com
- www.mtimesofindia.com
- www.indianexpress.com
- https://dpiit.gov.in
- www.business-standard.com
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