Issues with Ease of Doing Business

Syllabus: General Studies Paper 3

Context:

The Ease of Doing Business Index (EoDB) has been abolished as the flagship product created by the World Bank came under attack on grounds that its data was modified.

Background:

• Recently World Bank informed it had paused the next Doing Business report and initiated a series of reviews and audits of the report and its methodology.
• World Bank also informed that it will be working on a new approach to assessing the business and investment climate.
• Ease of Doing Business Rankings was paused as World Bank found data irregularities on Doing Business 2018 and 2020 which were reported internally in June 2020.
• Ethical Issues: Distortion of data in the internal reports raised ethical matters, including the conduct of former Board officials as well as current and/or former Bank staff, leading to this decision of World Bank.

Ease of Doing Business Rankings: Key Points

• Background: The Ease of Doing Business Report was introduced by the World Bank in 2003.
• Objective: to provide an assessment of objective measures of business regulations and their enforcement across 190 economies.
• Parameters used for Ranking: Ease of Doing Business Report used the following ten parameters-
• Starting a Business,
• Dealing with Construction permits,
• Electricity availability,
• Property registration,
• Credit availability,
• Protecting minority Investors,
• Paying Taxes,
• Trading across borders,
• Contracts enforcement, and
• Resolving Insolvency.

Significance of Ease of Doing Business Report:

• Informs the actions of policymakers,
• Helps countries make better-informed decisions, and
• Allows stakeholders to measure economic and social improvements more accurately
• Acts as a valuable tool for the private sector, civil society, academia, journalists, and others, broadening understanding of global issues.

Ease of Doing Business Rankings: India’s Performance

• India showed the most notable improvement in 2017, 2018, and 2019 Ease of Doing Business Ranking.
• India’s 2017 Ranking- 100th Rank
• India’s 2018 Ranking- Placed at 77th Position
• India’s 2019 Ranking (most recent)- Secured 63rd Ranking

India’s ranking in the Ease of Doing Business Report basically depended on the performance of only two cities- Delhi and Mumbai.

• Weightage of Mumbai- 47%
• Weightage of Delhi- 53%

Benefits of Ease of Doing Business Rank

The rank a country secures under EoDBR by the World Bank brings a lot of benefits along. These benefits are given in the points below:

• The image of the country in the global market improves. GoI has implemented as many as 37 reforms in the reference period and wants to evaluate the effectiveness of these reforms
• The government is taking steps to liberalize the business and these reforms are working
• It changes the image of the country in the eyes of the global market into a favourable country to conduct business in
• The rankings are expected to act as a guide to investors to take/make decisions. Hence better the ranking in the report more the favourability.
• The performance of GoI in terms of implementation of GST and will provide an answer with the question of how business-friendly this reform is (GST was not considered for last year’s ranking and this year’s ranking too could not fully account for GST as the deadline for tax-related reforms was 31st December and it had been just six months into the implementation of GST)
• The growth in industries has been averaging around 7% in the 90s and increased to 7.4% in the last decade. At the end of it the manufacturing, export sectors came under pressure because of the global financial crisis. The government through better regulatory environment aims to attract domestic and foreign investments into the manufacturing sector

The Indian Express Link:

https://indianexpress.com/article/opinion/columns/ease-of-doing-business-index-world-bank-7552199/

Question:

Discuss various efforts made by India and various states to improve ease of doing business in India. What else needs to be done?