By: Bhakti Dhanwai

As India seeks to achieve its ambitious visions for the economy, we finally witness the growth and expansion of the country’s business and entrepreneurial skills. With their numerous undertakings in recent years, the government has not only eased the functioning of the business environment, but also seeks to incentivise establishment and expansion of businesses. But this flexible business environment was not an element of the Indian economy until a few years ago. Then how exactly did India manage to create this hospitable environment, giving its entrepreneurs the much needed ease of doing business?

Ease of Doing Business (EoDB) index has been defined by the World Bank, which ranks countries according to the flexibility and ease of setting up and running business. India has climbed up the rankings by tremendous leap in less than a decade, being one of the top 10 improvers for 3 times in a row. Ranking 142 in 2014 out of 190 countries, India rose to 63rd rank in World Bank’s Doing Business Ranking 2020. The index ranks countries for their ease of doing business based on 10 detailed parameters, in which India has shown significant improvement across many.

India’s rise as a business friendly economy has been a long journey. Historically, India as a nation never prioritised business and entrepreneurship as elements of growth and development. Since independence, its major policy reforms sought to address burning issues like poverty, illiteracy etc. Being an inherently agrarian economy, policy focus stayed mainly on acheiving food sufficiency, and public welfare at large. Industrial growth, though sought after, remained limited. The stringent licensing policies obstructed the start and expansion of businesses, demoralising many potential business settings. India’s initial decades after freedom were highly regulating and demotivating for business. This changed with the 1991 economic reforms, which opened new doors for business in India.

The 1991 policies of liberalisation, privatisation and globalisation came as a boon for India’s business sector. Licensing and red-tapism for starting, running and expanding businesses was made almost negligible, creating opportunities for many new businesses. The opening up of the economy to the international market attracted major foreign companies to set up units in India, getting in major foreign investments. For a decade since 2003-2004 India undertook around 48 business reforms, which have been captured by the Doing Business index. This was the start of business growth in India.

This was merely India’s history of business. The country gained significance as a business friendly economy in today’s times, as it carried out various big and small policy reforms in recent years, reforming its business environment to attract domestic as well as foreign investments. India has come a long way on its path to build an attractive and flexible business environment in the country. From Centre to individual states, the nation has sought to ease business and promote entrepreneurship across the nation, making India one of the most sought after business locations in today’s times.

The Centre has carried out policy reforms and measures to work in the various parameters of the EoDB index, easing the business environment in India. The World Bank ranks countries for their performance in various parameters which define ease of business environment across nations. Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property, Getting Credit, Protecting Minority Investors, Paying Taxes, Trading across Borders, Enforcing Contracts, and Resolving Insolvency are the 10 parameters on the basis of which countries are ranked. India’s 63rd rank in Doing Business Ranking 2020 is attributed to its policy reforms which improved its ranking for the parameters of Starting a Business, Dealing with Construction Permits, Trading Across Borders, and Resolving Insolvency.

Company incorporation has been eased by abolishing filing fees for SPICe company incorporation form. Digitisation of registering for ESIC and EPFO, has also paced up the process. Reserving company names with the Ministry of Corporate Affairs has also been simplified. These measures have simplified and paced up the tedious process of setting up a new business.

The process and time for obtaining construction permits in India has been eased to a great extent. This has not only made the process cheaper and faster, but has enabled ensuring quality control by strengthening professional certification requirements. The cost of obtaining permits has been reduced to 5.4% from 23.2% of the nation’s per capita income. India’s ranking in Dealing with Construction Permits has grown to 27th in 2019, against 184th in 2014.

The Insolvency and Bankruptcy Code of 2016 has been significant for India to improve its rank in Resolving Insolvency. This has not just facilitated companies to restore financial viability, but also enabled creditors to revert their money. The measures have increased the recovery rate for creditors to 71.6 cents on a dollar, against 26.5 cents previously. As of now, India is one of the best rankers in Resolving Insolvency in South Asia.

The Indian Customs Single Window Project and digitisation of complex procedures and documentation has facilitated faster and smoother international trade. Enabling post clearance audit, upgraded port infrastructure, e-documentation and developing an e-platform of stakeholders are some of the major reforms that contributed to India’s 68th rank in Trading Across Borders.

All other parameters too have shown positive responses to the various policy reforms carried out across India. India ranks 22nd in Getting Electricity, a huge growth against 137th rank of 2014. This is owing to the simplified and faster procedures. Filing for taxation has been simplified and digitised to a great extent. Corporate tax has been substantially reduced to 25% for mid-sized companies. Despite these positive responses, the World Bank claims that India falls short when it comes to parameters of Enforcing Contracts and Registering Property, ranking 163rd and 154th respectively.

The Department for Promotion of Industry and Internal Trade (DPIIT) launched Business Reforms Action Plan (BRAP) across states for a sector specific approach to promote a positive business environment across sectors. BRAP has been updating action points across more sectors and reforms every year. The BRAP seeks to undertake assessment across reforms including contract enforcement, single window system, environment registration enablers, land availability and allotment, and many more. The action plan is updated every year, seeking to expand and cater to every possible business dimension and sector.

Launch of the Make in India Campaign in 2014 sought to attract more foreign investment, and give a boost to India’s private sector, trying to enhance competitiveness in the country. Not just foreign investment, but domestic investment too has been promoted through various policy undertakings. Startup India was a scheme launched to incentivise and promote entrepreneurship and innovation, by creating a supportive business ecosystem for startups. Small and medium enterprises have been financially and logistically supported to function and grow in the competitive business environment.

India as a nation has grown immensely as a business friendly ecosystem. From an environment where business, investment seemed difficult and uncertain, India has managed to become a hub for investment and emerging businesses. Though it lags behind in certain aspects, it has been successful in developing a healthy business environment in a very short span of time. It has managed to gain international perception of a potential business hub. India has come a long way in its ease of doing business, as it continues, it has a long way to go. Good and efficient measures, focussed on easing the business environment need to be successfully implemented to solve the current discrepancies and work for a smooth and healthy business environment.


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