India improves Ease of Doing Business Ranking: Real progress or Chimera?

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India climbed 14 Ranks in the World Bank’s Ease of Doing Business 2020 survey to stand at 63, among 190 countries, making it the one of world’s top 10 most improved countries for the third consecutive time. Last year, India jumped 23 places to reach 77th position. These rankings were announced in October 2019. Improvement in World Bank’s Ease of Doing Business Ranking point to the reformist credentials of the Narendra Modi-led National Democratic Alliance (NDA) government that has implemented many big reforms like GST and Insolvency and Bankruptcy Code. But some critics opine that Rankings may not present a true picture of real economy. 

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So, Ease of Doing Business is a hot GD Topic 2020 for MBA Entrance. It can also be used for Essay Writing (WAT) for MBA Entrance. Let’s understand the Topic in detail.  

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Background of Ease of Doing Business Ranking

  • Doing Business Survey by World Bank Group is based on various Government regulations which become contraints for the starting and operating Business in the country
  • World Bank has been publishing the ‘Ease of Doing Business Report’ for the last many years. The first report was measured in September 2003
  • The first Ease of Doing Business Ranking report consisted 145 economies which has expanded to 190 economies in 2018 across the world
  • More aspects that are relevant to the daily operations of domestic small and medium-size firms to measure the rankings have been included
  • Role of Private sector is recognized in arriving at the rankings as it provides an estimated 90% of employment in developing economies

How the Doing Business Rankings Measured? Key Parameters

  • Doing Business Ranking measures aspects of business regulation and their implications for firm establishment and operations
  • It does not include all the issues that are relevant for businesses’ decisions, but it covers important areas that are under the control of policy makers
  • Governments worldwide recognize the economic and political benefits of improved business regulation
  • 119 of the 190 economies measured by Doing Business 2018 enacted at least one business regulation reform in 2016/17. Of these, 79.8% implemented at least one reform for a second consecutive year and 64.7% for a third
  • The eleven parameters that formed the basis of Ease of Doing Business Ranking 2018 are in 5 broad areas namely – Starting the Business; Getting a location; Accessing finance; Dealing with day-to-day operations; Operating in a secure business environment.
  • 11 Ranking parameters are - Starting a Business; Labor market regulation; Dealing with construction permits; Getting electricity; Registering property; Getting credit; Protecting minority investors; Trading across borders; Paying taxes; Enforcing contracts; Resolving insolvency


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India’s Ranking Positions
India has improved from 132 position in Doing Business Ranking in 2008 to 77 position in 2018 and 63 position in 2019.

 

Ranking Improvement: Boost to Indian Business Environment

  • The Doing Business Ranking improvement indicates the effectiveness and quality of business regulation.
  • Research findings substantiate the economic relevance of the aspects of business regulation measured by Doing Business. Recent research, for example, examines the impact of improving business regulation. One study finds that high start-up costs can result in lower overall productivity
  • Improvement in Ease of Doing Business position will boost the country’s image and will attract more foreign investments
  • The Ranking improvement will attract more entrepreneurs to set up business driving more projects in ‘Start Up India’ and ‘Make in India’.
  • Doing Business Ranking focuses to improve the key areas of interaction between the government and entrepreneurs, where policy makers and regulators can directly influence procedures to facilitate these interactions

Doing Business: Ranking Positions 2018
World Bank has awarded first place to New Zealand followed by Singapore in Ease of Doing Business Rankings. The Ranking places awarded by World Bank in Doing Business Survey 2019 are as below:

Country Global Rank
New Zealand 1
Singapore 2
Hong Kong SAR, China 3
Denmark 4
Korea, Rep. 5
United States 6
Georgia 7
United Kingdom 8
Norway 9
Sweden 10

But do Rankings really reflect on-ground Improvement?
Doing Business Ranking Survey by the World Bank is termed as a controversial study by critics. It may not reflect the true picture of Ease of Doing Business. Let’s understand more.

  • The ranking improvement does not reflect ground image. The indicators and measures are referred to the costs, requirements and fees of doing business in the country's largest business city; thus conditions elsewhere within the country may differ.
  • Some of the Independent Evaluation Group members of the world bank have questioned the reliability and objectivity of its measurements
  • Many critics doubt the relevance of the issues it addresses
  • Many others fear that the ranking parameters may unduly dominate countries reform agendas at the expense of more crucial development objectives
  • Attention given to the parameters may indicate that the World Bank values less burdensome business regulations more highly than its other strategies for poverty elimination and sustainable development
  • Satisfying regulatory requirements will take longer if the business lacks information or is unable to follow up promptly. It may not understand "work-arounds", "facilitating fees", and "learning time" that speed or delay approvals and causes variation costs.
  • A study commissioned by the Norwegian government alleges methodological weaknesses, an uncertainty in the ability of the indicators to capture the underlying business climate, and a general worry that many countries may find it easier to change their ranking in Doing Business than to change the underlying business environment

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