In the latest report of the Department for Promotion of Industry and Internal Trade (DPIIT)’s on annual ranking of states and Union Territories (UTs) in the “Ease of Doing Business” Andhra Pradesh has topped for the third time in a row, followed by Uttar Pradesh which achieved the second place, by making a jump of 10 notch up the list .
The report on ranking the states with regard to ease of doing business was released by Finance Minister Ms. Nirmala Sitharaman on September 05 who appreciated States’ seriousness in taking the exercise in its true sense. She also added that it would help States and UTs to become better place to do business.
The ranking is based on the implementation of the business reform action plan 2019 by States and UTs, according to a report released by Finance Minister Nirmala Sitharaman on September 5. It is aimed at promoting competition among States to improve the business climate so as to attract domestic as well as foreign investments.
- In a sort of remarkable feat Uttar Pradesh occupied the second position in 2019 as against 12th in 2018. For UP it marks a jump of 10 places in the rankings.
- Telangana slipped to the third position from second in 2018. It was followed by Madhya Pradesh (4th), Jharkhand (5th), Chhattisgarh (6th), Himachal Pradesh (7th), Rajasthan (8th), West Bengal (9th) and Gujarat (10th).
- Delhi’s position improved to 12th from 23rd in the last edition, while Gujarat slipped from 5th place in 2018.
The Losers in the ranking
The improvement in ease of doing business is a continuous process, and more so when states are making efforts to attract more domestic and foreign investment. There is no place for complacency and inertia or political uncertainty and lack of clarity on making and implementing the policies required for improvement in ease of doing business.
It is amply clear that when states are truly competing in implementing policies for enhancing ease of doing business, their ranks would not remain at the same place. Some states would rise up in the ranking and some states would slide down.
In 2015 Index, Gujarat featured at the top, with Andhra Pradesh grabbing the second position and Telangana 13th. In 2016, Andhra Pradesh and Telangana jointly topped the chart. In the last ranking released in July 2018, Andhra Pradesh topped the chart, followed by Telangana and Haryana (3rd). Haryana slid to 16th position in the latest ranking.
The states that lag behind in ease of doing business ranking
The lowest ranking in the ease of doing business was given to northeastern state Tripura, which was ranked at the bottom at 36th place. The state of Kerala, despite its higher ranking in Human Development Index ranked at 28th place in the ease of doing business while Bihar at the 2th place. Among the laggard States and UTs in the ranking, Assam was at 20th, J&K at 21st and Goa at 24th place.
Commenting on the exercise of ranking the states with regard to ease of doing business, Commerce and Industry Minister Piyush Goyal said that these rankings reflect the efforts that States and UTs are doing to better their systems and processes. It is also a wake-up call for those States which have slipped in the ranking. The minister revealed that the ministry is working on steps like creating a single-window system for approvals and clearances.
How ease of doing business ranking is measured
The 2019 ranking of states in terms of ease of doing business was the fourth edition of the report, which was first released in 2015. The Business Reform Action Plan 2018-19 includes 181 reform points covering 45 business regulatory areas such as access to information, single window system, labour, and environment, which form the basis of measuring developments with regard to ease of doing business.
The DPIIT in collaboration with the World Bank conducts an annual reform exercise for all States/UTs under the Business Reform Action Plan (BRAP). India is amongst very few nations which carry out this exercise. State rankings will help attract more investments, foster healthy competition and improve business climate.
The 2019 report states that the larger objective of attracting investments and increasing ease of doing business in each State was sought to be achieved by introducing an element of healthy competition through a system of ranking States based on their performance in the implementation of Business Reform Action Plan. According to Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Guruprasad Mohapatra, the ranking this time gives full weightage to the feedback from more than 30,000 respondents at the ground level, who gave their opinion about the effectiveness of the reforms.
India in World Bank’s Ease of Doing Business 2020 report
India has moved 14 places up at 63rd place among 190 nations in the World Bank’s 2020 ease of doing business ranking on the back of multiple economic reforms by the Indian government. However, it failed to achieve government’s target of being at 50th place. The country was 77th among 190 countries in 2019 report, an improvement by 23 places. The World Bank Ease of Doing Business report ranks 190 nations based on ten parameters, which includes ease of starting a business, construction permits, getting electricity, getting credit, paying taxes, trade across borders, enforcing contracts and resolving insolvency.
India’s rank has improved in 2020 report from 77th position in the World Bank’s ease of doing business in 2019. The country had also improved its ranking in 2018 for the second straight year, jumping 23 places to the 77th position on the back of reforms related to insolvency, taxation and other areas.
Ease of Doing Business 2020 Report acknowledges the 10 economies that improved the most on the ease of doing business after implementing regulatory reforms. In Doing Business 2020, the 10 top improvers are Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India, and Nigeria.
In Ease Doing Business 2020, India along with other top improvers implemented a total of 59 regulatory reforms in 2018/19—accounting for one-fifth of all the reforms recorded worldwide. While there has been substantial progress, India still lags in areas such as enforcing contracts (163rd) and registering property (154th). It takes 58 days and costs on average 7.8% of a property’s value to register it, longer and at greater cost than among OECD high-income economies. And it takes 1,445 days for a company to resolve a commercial dispute through a local first-instance court, almost three times the average time in OECD high-income economies.
The latest reforms are in the Doing Business areas of Starting a Business, Dealing with Construction Permits, Trading Across Borders and Resolving Insolvency. According to Junaid Ahmad, World Bank Country Director in India, India’s impressive progression in the Doing Business rankings over the past few years is a tremendous achievement, especially for an economy that is as large and complex as India’s. Special focus given by the top leadership of the country, and the persistent efforts made to drive the business reforms agenda, not only at the central level but also at the state level, helped India make significant and the focus now needs to be on continuing this trend to maintain and improve its ranking.
Inclusion of two new cities in World Bank’s Ease of Doing Business assessment of India
The World Bank has reportedly decided to include Kolkata and Bengaluru, besides Delhi and Mumbai, for preparing ease of doing business report to provide a holistic picture of business environment in a big country like India. This decision might have been taken to have bigger sample to measure India’s achievements in implementing policies regarding ease of doing business. India is a big country and it was not properly represented by just two cities, Delhi and Mumbai. The inclusion of Kolkata and Bengaluru, will present a much better picture of developments in India in this regard.