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WB Report Fails To Reflect Indian Government’s Efforts To Improve Business Environment

• By  Henry Dsouza
• October 29, 2016

Despite a slew of measures taken up by the Indian government to facilitate business, India has not been able to achieve much progress in the World Bank (WB) rankings for ease of doing business. India has managed to scale the ladder to 130th in the WB’s rating of Ease of Doing Business. In the previous year’s WB rating, India was initially placed at 130 but slid to 131 after a mid-year revision. The current WB report has slotted India one position up the ladder at 130 in the DB 2017 update. India is ahead of Cambodia and behind Cabo Verde in the overall ranking in DB 2017 report. The report states that India has taken steps to reform getting electricity, paying taxes and trading across borders. However, India slid four positions when it comes to starting a business. This is not because of bad performance on this parameter but because of other countries improving on their parameters. Currently, India is ranked at 155 in this parameter by the DB 2017 report. To start a business in Mumbai, an investor needs to complete 14 procedures which take around 26 days, at a cost of 16.5% of income per capita. This is an improvement on previous year’s report that put the number of days for starting a business at 29 days. Following are the procedures to start a business In India (according to relevant data for Mumbai):

1. Obtain digital signature certificate online. This procedure would take around 1-3 days and would cost around Rs 700 to 2,500 per digital signature certificate.
2. Obtain director identification number (DIN) online. This procedure would take around 1 day and would cost Rs 500 per DIN.
3. Reserve the company name online with the Registrar of Companies (ROC). It would take around 2 to 7 days to complete this procedure and would cost the investor around Rs 1,000/-
4. Pay stamp duties online, file all incorporation forms and documents online and obtain the Certificate of Incorporation. This would take   five days on an average.
5. Make a company stamp. This would take a day and can be done simultaneously with the pervious procedure. This would cost you around Rs 350 to 500/-
6. Obtain a Permanent Account Number (PAN) from an authorised franchisee or agent appointed by National Securities Depository Services Limited (NSDL) or Unit Trust of India (UTI). This normally takes around 7 to 10 days with a cost of Rs 93/- plus service tax.
7. Open a bank account. This should take the investor more than 2 days without any charges.
8. Register with Employee Provident Fund Organisation. This would be applicable only if the firm is employing more than 20 persons. Normally this procedure would take 7 days. It can be done simultaneously along with the previous procedures. This procedure will not cost anything to the investor.
9. Register for VAT online. This would take the investor around 10 days with fee of Rs 500 for registration and Rs 25 for Stamp Duty. Both are compulsory for VAT registration. This procedure can be done simultaneously with the previous procedure.
10. Register for medical insurance (ESIC) for employees. This procedure would take around 9 days with no charges and can be done simultaneously along with the previous procedure.
11. Obtain a tax account number for income taxes deducted at source from the Assessing Office of the Mumbai Income Tax Department. This procedure can be done simultaneously along with previous procedure and would take 7 days with a cost of Rs 55 as application fee plus service tax.
12. Register with Office of Inspector, Mumbai Shops and Establishment Act. This would take only 2 days and can be done simultaneously along with the previous procedure at a cost of Rs 1,200 (registration fee), plus 3 times registration fee for Trade Refuse Charges (Rs 3,600).
13. Receive inspection and obtain the Shops and Establishments registration certificate. This would take around 2 to 6 days with no charges. This can be done simultaneously with the previous procedure.
14. Register for professional tax. This would take around 2 days with no charge and can be done simultaneously.

For Delhi, it takes 26 days to complete 12 procedures according to the report, with a cost of 11.4% of income per capita. On the construction permits parameter, India has gone down one position in the Ease of Doing Business Report for 2017. It currently stands at 185.  According to data for Mumbai, investors need to fulfill 42 procedures that take around 164 days incurring a cost of 25% of the warehouse value. According to the data for Delhi, investors need to fulfill 29 procedures in 213 days, incurring a cost of 26.7% of the warehouse value. The parameter for getting electricity connections has improved the most among all other parameters and is the main reason why India is one position ahead in its ranking. Currently, the country has climbed 25 positions and now ranks 26. In Mumbai, investors need to fulfill five procedures which would take around 47 days with cost of 73% income per capita. In Delhi, investors need to fulfill around five procedures in 45 days at a cost of 186.6% income per capita. India made getting electricity faster and cheaper by streamlining the process of getting a new commercial electricity connection by providing connection from a 140 KVA capacity to a low tension (LT) network. This eliminated the need to install a distribution transformer. This reform impacted the city of Delhi. India has gone up by two positions in the registering a property parameter and currently stands at 138 in the DB 2017 report. According to the data for Mumbai, the investor needs to fulfill seven procedures, which would take 46 days with cost of 6.9% of the property value. According to the data for Delhi, investors need to complete seven procedures, which would take 46 days with a cost of 8.4% of the property value. Getting credits parameter has come down by two positions, now standing at 44 in DB 2017. World Bank has rated India’s strength of legal rights index both for Mumbai and Delhi as 6 out of 12. In protecting minority investors, India’s ranking has gone down by three positions, now standing at 13 in DB 2017. Under this parameter, the indicator strength of minority investors’ protection index was rated 7.3 out of 10 for both Mumbai and Delhi. India’s ranking in the parameter for ‘trading across borders’ has gone up by one position, now standing at 143 in DB 2017. According to the data for Mumbai, it takes investors five documents to export a consignment. For exports, border compliance would take 85 hours and the cost would be around US$ 368 and for documentary compliance it would take 58 hours with cost of US$ 94. To import a consignment to India, the investors would need to fulfill around 7 documents. For imports, border compliance would take 307 hours with cost of US$ 556 and for documentary compliance it would take 65 hours and cost US$ 129. According to Delhi data, it would take the investors five documents to export a consignment. For exports, border compliance would take 125 hours and the cost would be around US$ 453 and for documentary compliance it would take 21 hours with cost of US$ 90. The Delhi data for import indicated that to import a consignment, investors would need to fulfill compliance of seven documents. For imports, border compliance would take 262 hours at a cost of US$ 590 and for documentary compliance it would take 58 hours and cost US$ 140. Bangladesh moves up two notches in Ease of Doing Business According to the World Bank’s DB 2017 report on ease of doing business, Bangladesh has inched up two places in its overall rankings to stand at 176. In ease of launching start –ups however, Bangladesh has gone down seven places and stands at 122. For the ease of dealing with construction permits parameter, Bangladesh stands at 138. For the ease of getting electricity parameter, Bangladesh stands at 187. In the parameter for ease of registering property, Bangladesh moved up a notch and stands at 185. For ease of protecting minority investors parameter, Bangladesh has gone a notch down and stands at 70. For the ease of paying taxes parameter, Bangladesh has gone down three notches and stands at 151. For the ease of trading across the borders, Bangladesh stands at 173. For the ease of enforcing contracts, Bangladesh stands at 189. For the ease of resolving insolvency parameter, Bangladesh has gone two notches up to 151. China up two notches in ease of doing business WB report China moved up the rankings sheet of the World Bank ease of doing business report (DB 2017). Currently, China stands at 78 in overall ease of doing business.  In the start-up parameter China has moved up seven notches and stands at 127. China implemented reforms for start-ups by introducing a single form to obtain a business license, organisation code and tax registration. This reform is effective in both Shanghai and Beijing. China has fallen two notches in dealing with construction permits parameter. According to the current report they stand at 177.  For getting electricity parameter, China has fallen down 5 notches and stands at 97.  For the registering property parameter, China stands at 42. China’s sharpest increase has been for the getting credit parameter. The country is up by 16 notches in the report and stands at 62. China recently mitigated access to credit information by reporting payment histories from utility companies and providing credit scores to banks and financial institutions. This reform is effective both in Shanghai and Beijing. For the parameter protecting minority investors, China has gone five notches down and stands at 123. For the parameter paying taxes, China is four notches down and stands at 131. For the parameter trading across borders, China is two notches down and stands at 96. For the parameter enforcing contracts, China is one notch down and stands at 5. For the parameter resolving insolvency, China stands at 53. Indonesia takes a giant leap in World Bank Ease of Doing Business ratings Indonesia jumped 15 positions up and is currently ranked at 91 in the World Bank’s DB 2017 ease of doing business report.  In the parameter starting a business the country stands at 151 with a jump of 16 positions up. Indonesia made starting a business easier by creating a single form to apply for the company registration certificate and trading license. The country has also abolished the minimum capital requirement for small and medium-size enterprises and encouraged the use of an online system to reserve company names. Here, investors need to fulfill 11 procedures in 22 days with cost of 19.1% of income per capita. In getting electricity parameter, Indonesia has jumped 12 positions, now standing at 49 in DB 2017. The country has made the process for getting an electricity connection faster by reducing the time for contractors to perform external work thanks to an increase in the stock of electrical material supplied by the utility. In registering a property, Indonesia has gone up by 5 positions, now standing at 118. The country has made the digitised the registering of property and set up geographic information systems. To register a property, the investor needs to fulfill five procedures within a span of 25 days with a cost of 10.9% of property value. In getting credits, the country has gone up by eight positions, now standing at 62. Here, on the strength of legal rights, the country has scored 6 out 12. The country has strengthened access to credit by establishing a modern collateral registry. In paying taxes, the country has gone up by 11 positions, now standing at 104. The country has introduced an online system for filling and paying health contributions and also made paying taxes more costly by levying a new pension contribution at a rate of 2% paid by employers. In terms of trading across borders the country moved up five positions, and is now at 108 in DB 2017. Indonesia has improved the customs services and document submission function of the Indonesia National Single Window. To export a consignment from Indonesia, the investor needs to fulfill four documents in 108 hours that cost US$ 380 for the border and documentary compliances. To import a consignment to the country, the investor needs to fulfill eight documents in 212 hours that cost US$ 544 for the border and documentary compliances. Vietnam witnesses steep climb in World Bank Ease of Doing Business ranking Vietnam has gone up by nine positions, now standing at 82 In DB 2017 report issued by World Bank to rank the ease of doing business. In starting a business parameter, Vietnam has gone down by 10 positions. Here the investors need to fulfill nine procedures in 24 days with cost of 4.6% of income per capital. Vietnam made starting a business more difficult by requiring entrepreneurs to receive approval of the seal sample before using it. In protecting minority investors, Vietnam has jumped up by 31 positions, now standing at 87 in DB 2017. Vietnam strengthened minority investor protections by making it easier to sue directors in cases of prejudicial transactions between interested parties, by increasing shareholder rights and role in major corporate decisions; by strengthening the ownership and control structures of companies; and by increasing corporate transparency requirements. Vietnam has scored 5.3 out 10 on the indicators Strength of minority investor protection index, which is averagely good. However, the investors need to be vigilant while investing here. In trading across the border parameter, Vietnam has jumped up by 15 positions. The country now stands 93 in DB 2017. Vietnam made exporting and importing easier by implementing electronic customs clearance system. Hong Kong SAR, China climbs the rankings by one notch Hong Kong SAR, China has gone up by one rank in DB 2017, now standing at 4. Hong Kong SAR, China has always remained on top of the list. In starting a business, the country ranks on the third position as the country as reducing the business registration fee. Here the investors need to fulfill only two procedures in just two days, which would cost around 0.6% of income per capita. Hong Kong SAR, China, has streamlined the processes of reviewing applications for new electrical connections and also reduced the time needed to issue an excavation permit. The country ranks third in the current report. For investors to get electricity, they have to fulfill three procedures in only 27 days with cost of 1.4% of income per capita. Trading across the borders has not changed its ranking, standing at 42.  To export a consignment from Hong Kong, investor needs to fulfill three procedures in 20 hours and it costs US$ 548 for the border and documentary compliances. To import a consignment into the country, the investors need to fulfill just three procedures in 20 hours and cost US$ 323 for the border and documentary compliances. Russia down four notches in Ease of Doing Business WB report After the mid-year revision of the World Bank study placed Russia at 36 for ease of doing business, it has gone down four notches to 40 in the latest DB 2017 World Bank report that was out. Interestingly, in the previous year’s World Bank report Russia was positioned at 51 for ease of doing business. The mid- year revision brought it up by 15 notches to 36. For the parameter to start a business, Russia has gone up by 11 positions and now stands at 26.  In comparison to the previous year’s report, the country had reduced the procedure, time required to complete the procedure and cost too. Now the investors need to fulfill four procedures in 11 days with cost of 1% of income per capita. For the parameter dealing with construction permits, Russia has climbed two positions up, now standing at 115. Russian Federation Saint Petersburg made dealing with construction permits easier by removing the requirement to obtain permission to fence the construction site. For the parameter on registering property, Russia has gone down one position and now stands at 9. For trading across the border parameter also Russia has gone down two notches and stands at 140 in the current report. Brazil goes down two notches in Ease of Doing Business WB report Brazil has climbed down from 121 to 123 in the ease of doing business rankings according to the latest DB 2017 report from the World Bank. Brazil slid by one notch in the start-up parameter and stands at 175. Brazil reduced the time needed to start a business by implementing an online portal for business licenses in Rio de Janeiro. However, Brazil also made starting a business more difficult by reducing working time at the business registry in Rio de Janeiro. For the dealing with construction permits parameter, Brazil has come down two notches and stands at 172. In the getting electricity parameter, Brazil has fallen eight notches and stands at 47. In the registering property parameter, Brazil has climbed two notches and stands at 128. For the getting credit parameter, Brazil has fallen four notches and stands at 101. When it comes to the parameter on protecting minority investors, Brazil has come down two notches and stands at 32. In the paying taxes parameter, Brazil stands at 181. For the trading across borders parameter, Brazil has climbed a notch and stands at 149.  Brazil made trading across borders easier by implementing an electronic system for importing, which reduced the time required for documentary compliance. This reform applies to both Rio de Janeiro and Sao Paulo. For the enforcing contracts parameter, Brazil has shot up eight notches. It stands at 37. Brazil made enforcing contracts easier by adopting a new mediation law that contains financial incentives for the parties to attempt mediation, and a new code of civil procedure. For the resolving insolvency parameter, Brazil has come down seven notches and stands at 67. South Africa comes two notches down South Africa descended by two notches in the World Bank DB 2017 report on the ease of doing business and stands at 74. For start-up business, South Africa has scaled down 6 notches to 131. South Africa made starting a business easier by introducing an online portal to search for a company name. For the parameter, dealing with construction permits, South Africa has come down one rank and stands at 99. For getting electricity parameter, South Africa has come down three notches and stands at 111. For registering property, South Africa has come down five notches and stands at 105. South Africa made it more expensive to transfer property by increasing the property transfer tax. The corresponding figure for getting credit stands at 62, a climb down of two notches. For the parameter on protecting minority investors, South has fallen by four notches to 22.  For the paying taxes parameter, South Africa has fallen by two notches to 51. South Africa made paying taxes more costly by increasing the rates of vehicle tax and property tax. At the same time the rate of social security contributions paid by employers was reduced. South Africa made paying taxes more complicated by increasing the time it takes to prepare VAT returns. For the trading across borders parameter, South Africa has fallen two notches to 139. For the enforcing contracts parameter, South Africa has fallen three notches to 113. For the resolving insolvency parameter, South Africa has shot up one notch to 50. Sri Lanka down by a notch Sri Lanka has come down just one notch and stands at 110 position for ease of doing business according to the DB 2017 report issued by World Bank. It has succeeded in climbing a whopping 21 positions in the starting a business parameter.  Sri Lanka has removed the stamp duty on newly issued shares to make starting a business easy. In the dealing with construction permits parameter, Sri Lanka has come down by five notches and stands at 88. In the getting electricity parameter too it has come down by four notches to 86. Getting credit has become more difficult as the position for this parameter has come down by 9 places to 118. However, for protecting minority interests, Sri Lanka has climbed nine notches and currently stands at 42. Sri Lanka strengthened minority investor protections by requiring board and in some cases shareholder approval of related-party transactions and by requiring that such transactions undergo external review. Cambodia down to 131 Cambodia’s overall ranking in DB 2017 has gone down by three positions, now standing at 131. Starting a business parameter has gone down one rank, since Cambodia made starting a business more difficult by increasing the time required to register and by requiring companies to submit evidence of capital deposit after registration. To start a business here, investor needs to fulfill nine procedures in 99 days with a cost of 57.2%. Except getting credit parameter, all others have got negative marking on the ranks. Source: World Banks Doing Business 2017 Report

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