The World Bank’s recent Ease of Doing Business Report for 2020 provides a vital analysis of the business climate in 190 countries over a 12-month period that ended on May 1, 2019. This article aims to demystify the key findings of this extensive report, especially focusing on India’s performance and improvements.
New Zealand and Somalia: The two extremes
This year, New Zealand has managed to retain its first position, demonstrating the country’s favorable business environment. Conversely, Somalia remains at the tail end, struggling at the 190th spot.
India’s leap towards better doing business environment
India has displayed a remarkable growth by jumping 14 places ahead from its 77th position in 2018 to reach the 63rd spot in 2019. This progression was reflected in India’s improved score which went up from 67.23 in the previous year to 71.0 this year. For three consecutive years, India has made it to the list of the top 10 economies where the business climate has seen significant improvements.
Key drivers behind India’s improved ranking
India’s improved ranking can be attributed mainly to advancements in four parameters:
1. Starting a Business – India has streamlined the process of starting a business by integrating multiple application forms into a single incorporation form.
2. Dealing with Construction Permits – The cost of building a warehouse accounted for approximately 4% of the warehouse’s value, down from 5.7% compared to last year.
3. Trading Across Borders – A unified electronic platform and the infrastructural upgrades at ports have expedited the import and export processes.
4. Resolving Insolvency – The recovery rate under resolving insolvency increased impressively from 26.5% to 71.6%. The time taken to resolve insolvency also reduced significantly from 4.3 years to 1.6 years.
India’s stance in South Asia
India has consistently held the top spot amongst South Asian countries. In comparison to its 6th rank in 2014, India’s rise has been phenomenal.
The World Bank’s future considerations for India
The World Bank plans to include Kolkata and Bengaluru, along with Delhi and Mumbai, in future reports. This inclusion will aim to provide a more comprehensive understanding of the country’s business environment.
| Parameters for evaluation | Description |
|---|---|
| Starting a Business | Evaluation of procedures, time, cost, and minimum capital to start a limited liability company |
| Dealing with Construction Permits | Assessment of processes and fees to build a warehouse, and the quality control and safety mechanisms in the construction permitting system |
| Trading Across Borders | Time and cost to export and import |
| Resolving Insolvency | Examines the time, cost, outcome, and recovery rate for a commercial insolvency proceeding |
About the Ease of Doing Business Report
The report, first introduced in 2003, objectively assesses business regulations and their enforcement across 190 economies using ten criteria affecting a business through its life cycle. These parameters include 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. Additionally, two parameters – employing workers and contracting with the government – were introduced this year but weren’t included in the score and ranking calculations. The ranking of countries is based on the ‘Distance to Frontier’ (DTF) score, which measures an economy’s gap from the best global practices. For instance, a score of 75 signifies that the economy is 25 percentage points away from the highest standard performance across all economies over time.
