The extensively publicized economic development of the country and widespread promotion of its markets to the world will get a further boost with India moving up in the World Bank’s Ease-of-Doing-Business index. A proactive administration driving the much-needed change in policies and processes has resulted in India rising to Rank 77 from Rank 100, a step-up in its global Ease-of-Doing-Business standing for the second year in a row – previously the rankings were boosted from 133 to 100 on account of some strong administrative changes implemented by the Government.
Of the various parameters on which the global Ease-of-Doing-Business ranking is generated by the World Bank, some of the aspects which significantly contributed towards the boost in India’s rankings for 2018-2019 are elaborated below:
One of the key improvements that have been implemented in the process of setting up a business in India is the replacement of the previously existing multiple application forms into a general incorporation form. This coupled with the implementation of GST (Goods and Services Tax) in place of multiple other taxes, has made the registration process faster. With the digitization of these undertakings, the entire exercise has not only become more efficient but also is now devoid of bureaucratic hurdles that previously existed. For example, in Mumbai the earlier practice of site inspections mandated under the Shops and Establishments Act as part of the process to register a company has now been abolished.
A major point of friction that existed in establishing a business in India, was to setup a brick-and-mortar presence, which implied the construction of a office-space building. This bottleneck has now been eliminated by the implementation of more efficient and streamlined process to obtain a building permit. Additionally, the costs associated with obtaining a construction permit too have been reduced. A policy has also been put in place to improve overall quality control in buildings by enforcing that liability and insurance will applicable for a term of 10 years.
A crucial part of setting up a business in India, be a manufacturing entity or an office space, is having solid infrastructure and resources – electricity being a key one of those. From making the process to obtain an electricity connection easier to reducing charges of low-voltage connections, small but impactful steps have been taken to help new businesses. Also, the time required for the related technical and utility team to undertake the external connection work has been reduced.
When the Insolvency and Bankruptcy Code (IBC) was implemented in 2016, distinct strides were made not only for businesses looking to exit but also in the facilitation of transactions between creditors and borrowers. The recent amendments in the IBC further safeguard the interests of secured creditors by ensuring that they will have priority over all other claims at the time of insolvency proceedings. This move will assuredly bring out the creditors at more ease when it comes to lending to companies, especially those who are setting up their presence in Indian markets, thus impacting the overall business ecosystem.
As part of its efforts to bring itself up-to-speed with the other leading economies of the world, India successfully implemented the one-tax system through the Goods and Services Tax (GST). This inevitably made it easier to pay taxes because it replaced many indirect taxes by a single tax, uniformly across the country. Reductions in the rates for Corporate Income Tax and Employee’s Provident Fund Schemes paid by the employer have also reduced the overall costs associated with paying taxes for businesses in India.
One of the key areas that has overall impacted the Indian business environment has been the enablement of trade across borders, both between India and other countries as well as across states within India. This can be seen not only in the increase in global interest in Indian markets across sectors but also in the World Bank’s Ease-of-Doing-Business rankings.
Several initiatives have been put in motion across the spectrum, from undertaking proactive bilateral trade agreements with other countries to revolutionising the processes and logistics involved in how businesses undertake trade. As an example of the latter, the implementation of electronic sealing of containers, improvements in port infrastructures, and enabling the electronic submissions of documents associated with a transaction/trade, have effectively reduced the time and cost associated with import-export transactions.
One of the most significant factors that has consistently impacted the decision-making of businesses to enter Indian markets is the large workforce, across qualified as well as skilled-labour segments. The new regulations implemented that pertain to weekly holiday work, overtime hours, and paid annual leave will positively impact the efficacy and growth of the labour segment in India.
The numbers showcasing the country’s prowess to develop its business environment is not very far from the current global sentiment towards its markets, especially with the sustainability being displayed by India’s policy-makers.
This boost in rankings along with the continual efforts of the Government to strengthen and further develop our bilateral trade agreements with several other countries promises to hone the potential of Indian markets and present opportunities for more international businesses to setup their presence in India.
Written by Shõan Shinde
Shõan Shinde heads the Marketing function at Coinmen Consultants LLP and is now playing a significant role in the firm’s efforts to explore new international markets.