The government has zeroed in on six laggard segments – especially enforcing contracts, registering property and starting a business — that have prevented India from breaking into the league of top 50 nations in the World Bank’s ease of doing business index.
The country’s rank under the Modi government leaped from 142nd in the 2015 report (which reflected reforms undertaken mostly up to May 2014) to 63rd in the report released last year. But its lacklustre performance in six of the 10 indicators delayed the achievement of its target of being in top 50.
To ensure improved performance in “enforcing contracts”, in which India held the 163rd rank last year, the government, with the help of the judiciary, wants to set up more commercial courts and fast-track important cases through daily hearings. The Delhi government has already approved a proposal to set up 22 commercial courts while Mumbai has plans for 16.
A senior government official said it took an average of 1,445 days and 31% of claim value to enforce a contract last year. The effort is to bring down the number of days to 1,200 now. The government also wants to raise awareness about the electronic case management tool facility for judges and lawyers and introduce pre-trial conference. Online filings and electronic summons are to be encouraged.
In registering property, the government intends to ensure that the number of days taken for it is brought down to less than 38 from 58 and the cost to 7.3% of the property value from 7.8%. In this indicator, India was ranked 154th last year.
Similarly, novel land titling laws are expected to be implemented in the coming years. The government also wants to ensure that all land records are digitised across states and all plots witness cadastral mapping. An independent grievance redressal system, public availability of property dispute statistics are among the proposals.
Of course, for all the plans to be implemented, a massive collaborative effort involving various wings of the central and state governments (covering Delhi, Mumbai, Kolkata and Bangalore that are included in the World Bank’s survey), judiciary and regulators is a must. The department for promotion of industry and internal trade (DPIIT) has been spearheading the ease of doing business initiative.
In “paying taxes” (India was ranked 115th in it), the government intends to reduce the average time taken from 252 hours a year to 152 hours. It also plans to reduce time taken for various compliances under the Employee State Insurance Corporation and Employee Provident Fund Organisation.
As for “starting a business”, the government is planning to reduce the number of procedures from 10 to less than 4. It also wants to reduce the average number of days taken to set up a business from 18 days to just six. In this indicator, India occupied the 136th spot in last year’s ranking.
In “trading across the border”, in which the country was ranked 68th, plans are afoot to reduce the average time taken for imports to 48 hours from 70 hours. For exports, this will be cut from 54 hours to 48 hours. Manual clearances by officers will be replaced with automated approval. Direct port delivery for imports and entry for exports will be raised.
While insolvency resolution has made great strides in recent years (India’s rank improved from 103rd in 2017 to 52nd last year), thanks to the implementation of the Insolvency and Bankruptcy Code, the government wants to step up its focus on it, considering its potential for further improvement. Broad-basing of the committee of creditors (CoC) by including operational creditors in it is one of the plans that has been mooted. The CoC, which has to endorse resolution plans for stressed assets with a 66% majority, currently comprises only financial creditors. Of course, any such plan has to go through rigorous examination.
Barring these six, in the four other gauges—protecting minority investors”, getting electricity, getting credit and construction permit—the country’s rank is already ranging from 13th to 27th, with limited scope for a dramatic improvement. Prime Minister Narendra Modi had set the target for India to be among the top 50 countries in ease of doing business.
Each year’s rank in the ease of doing business index usually reflects stakeholders’ perception of reforms undertaken up to the month of May of the previous year (except for the “paying taxes” category where the deadline is end-December). For instance, the 2020 rank, released last year, had captured these reforms undertaken in the year through May 2019.