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DAILY NEWS ANALYSIS

  • 21 February, 2021

  • 5 Min Read

Ease of Doing Business Rankings

Ease of Doing Business Rankings

The ease of doing business index is an index created jointly by Simeon Djankov and Gerhard Pohl, two leading economists at the World Bank Group. The report is released by the World Bank.

Why in news: 2020 data irregularities controversy: Several major newspapers – including the Financial Times, The Economist, and The Wall Street Journal – report that the data of China, Azerbaijan, United Arab Emirates, and Saudi Arabia among others were suspected to be “inappropriately altered” in the 2020 Doing Business publication. In light of the data irregularities found in both the 2018 and 2020 reports, the World Bank announced on 27 August 2020 that it would pause the Doing Business publication while it conducts a review of data changes for the last five reports and an internal audit of data integrity.

  • In August, the World Bank had decided to pause the publication the report due to irregularities in the data. As per new report, China’s slipped from 85th rank to 78th rank.
  • The rankings of three other countries - Saudi Arabia, United Arab Emirates and Azerbaijan have also changed.
  • As per 2020 report, India is placed at 63rd position among 190 countries, jumped by 14 positions from the previous year position. India’s rank remains unchanged after adjusting irregularities in the data.

About Doing Business project:

It provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level.

Launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle.

Performance of India:

  1. India improved its ranking by 23 places to secure 77th rank in World Bank’s latest 'Ease of Doing Business' report, 2019.
  2. India went up 14 rungs in the 2020 survey to score a 63, making it the one of world’s top 10 most improved countries for the third consecutive time.
  3. However, India failed to achieve government’s target of being at 50th place. It was 77th last year.
  4. This is the third year in a row that India has made it to the top 10 in Doing Business, which is a success which very few countries have done over the 20 years of the project.

Challenges:

  1. India still lags in areas such as enforcing contracts (163rd) and registering property (154th).
  2. It takes 58 days and costs on average 7.8% of a property’s value to register it, longer and at greater cost than among OECD high-income economies.
  3. It takes 1,445 days for a company to resolve a commercial dispute through a local first-instance court, almost three times the average time in OECD high-income economies.

What helped India improve its ranking?

  1. Sustained business reforms over the past several years.
  2. India conducted four reforms in the 12-month period to May 1. Among other improvements, India made the process of obtaining a building permit more efficient.
  3. Importing and exporting also became easier for companies with the creation of a single electronic platform for trade stakeholders, upgrades to port infrastructure and improvements to electronic submission of documents.
  • It ranks countries on the basis of Distance to Frontier (DTF), a score that shows the gap of an economy to the global best practice. For example, a score of 75 means an economy was 25 percentage points away from the frontier constructed from the best performances across all economies and across time.
  • This year, India’s DTF score improved to 67.23 from 60.76 in the previous year (2018).
  • Other reports published by World Bank:
    • World Development Report
    • Global Economic Prospects Report
    • Human Capital Index

Way forward

  • India's rapid growth will offer opportunities for both local and global business and will also create jobs that are the need of the hour due to the rising demographic dividend.
  • Better rank in ease of doing business and greater awareness about opportunities in the Indian business sector would attract foreign investors to invest in India and will also bring advanced technologies to the country.
  • If India aims to reach a higher rank in the index then there is a lot of work that needs to be done.
  • India’s jump in ease of doing business rankings will hopefully be a spur for further reforms, which, if successful, will lead both to a better business environment and greater prosperity for all.

Source: PIB


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