Insights by: Sumit Kochar & Neha Jha
INTRODUCTION:
India’s approach to business underwent a significant change after Prime Minister Narendra Modi emphasized improving India’s ranking in the World Bank’s Doing Business Report as part of the “Make in India” initiative. Ease of Doing Business (EoDB) became a crucial focus for attracting investments and developing India as a preferred destination for business.
Efforts have been directed towards simplifying processes, reducing time, rationalizing costs, and overall making it easier to conduct business in India. This involved close engagement with the World Bank to understand methodologies and global best practices, resulting in the development of a detailed reform roadmap in collaboration with ministries and states.
India’s ranking in the Doing Business Report improved significantly from 142nd in 2015 to 63rd in 2020. Over five years (2014-2019), India climbed 79 positions and maintained its leading position among South Asian countries, compared to being sixth in 2014. India’s economic strength, evident in its position as the world’s fifth-largest economy with a GDP of USD 4.1 trillion. Reflecting its robust economic prowess, India now proudly holds the title of the world’s fifth-largest economy, boasting a substantial GDP of USD 4.11 trillion.
The World Bank’s EoDB Project evaluates 190 economies on ten parameters, including starting a business, registering property, dealing with construction permits, getting electricity, getting credit, paying taxes, trading across borders, protecting minority investors, enforcing contracts, and resolving insolvency.
KEY INITIATIVES TO SIMPLIFY BUSINESS ECOSYSTEM:
Several initiatives have been undertaken to streamline business processes in India. For instance:
- Starting a Business:
The introduction of SPICe+ and AGILE PRO-S forms by the Ministry of Corporate Affairs (MCA) has streamlined the process of incorporating a company. SPICe+ is an integrated web form that offers various services like name reservation and mandatory registrations, making it easier for new companies to get started. Moreover, there are no fees for incorporating companies with authorized capital up to Rs. 15 Lakh or up to 20 members with no share capital.
- Dealing with Construction Permits:
The Online Building Permission System (OBPS) serves as a single window for obtaining all building permits. By bringing all relevant agencies onboard this system in Delhi and Mumbai, applicants no longer need to engage with each agency individually, simplifying the permit acquisition process.
Now, getting construction permits in India is a breeze thanks to the Online Building Permission System. It ensures all necessary paperwork and approvals are processed swiftly and efficiently. Different agencies like Fire, Water, and Sewerage now team up to inspect sites together on the same day. This simplifies the process of obtaining required No Objection Certificates (NOCs).
The introduction of fast-track approval systems by the Municipal Corporation of Greater Mumbai and the Municipal Corporation of Delhi has expedited the issuance of building permits, featuring innovations such as the Common Application Form (CAF), digital signature utilization, and online building plan scrutiny. Moreover, Delhi has made strides in standardizing building bylaws, incorporating risk-based classification systems and mandating the approval of building plans within 30 days. These initiatives have significantly reduced the time and cost involved in obtaining construction permits.
Land records are now digitized, making property transactions transparent and hassle-free. Building regulations are also categorized based on risk levels, ensuring safety standards are met.
- Registering Property:
Digitization of land records has been prioritized to bring efficiency and transparency in property-related transactions. Citizens can access property maps online, eliminating the need to physically visit government departments for obtaining maps.
- Enforcing Contracts:
The introduction of the Commercial Courts Act, 2015 aims to facilitate EoDB by expediting the resolution of commercial disputes. Dedicated commercial courts have been established, and e-filing has been made compulsory to streamline the judicial process.
- Resolving Insolvency:
The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 has revolutionized the process of resolving insolvency in India. The code prioritizes reorganization over liquidation, empowering creditors and increasing the recovery rate. Additionally, the code has been amended to introduce pre-packaged insolvency resolution processes for MSME corporate debtors.
- Engaging the States & UTs Towards Cooperative Federalism:
Business Reforms Action Plan (BRAP) promotes competitive federalism by incentivizing states and UTs to implement business-friendly reforms. It assesses states and UTs based on the reforms implemented, with a focus on both business-centric and citizen-centric reforms. The National Single Window System (NSWS) aims to provide investors with a seamless experience by integrating all licenses/approvals/NOCs required by businesses online. Central Inspection system (CIS) is an integral part of BRAP wherein States are encouraged to develop integrated risk-based inspection system covering various departments including Labour, Factories and Boilers, Legal Metrology, and State Pollution Control Board. CIS ensures centralized, random allocation of inspectors, adherence to predetermined checklists (except for complaint-based inspections), prohibits consecutive visits by the same inspector to an establishment, and mandates inspection report uploads within 48 hours. Additionally, BRAP encourages the development of online single window systems for granting construction permits, electricity connections, and water connections to enhance service delivery across states and UTs.
- Safeguarding the interest of investors:
Measures have been implemented to safeguard investors’ collateral held by stockbrokers. Securities exchange board of India (SEBI’s) master circular on stockbrokers (SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/03) includes clauses aimed at preventing the misuse of clients’ funds and ensuring that one client’s collateral is not utilized for another. Efforts have also been made to streamline reporting mechanisms by discontinuing certain redundant reports, thereby enhancing efficiency in monitoring, and contributing to the EoDB.
- Tax Reforms:
Several significant tax reforms have been introduced in India aimed at simplifying the tax structure and promoting ease of compliance for businesses. Notable changes include the reduction of corporate tax for mid-sized companies from 30% to 25%, along with the option for domestic businesses to opt for a concessional tax system with a rate of 25.17%, devoid of tax breaks or exemptions, yet exempt from Minimum Alternate Tax (MAT). Additionally, new domestic manufacturing enterprises benefit from a reduced tax rate of 15% (17.01% including surcharge and cess), provided they were incorporated on or after October 1, 2019, and commence production before March 31, 2023, without eligibility for other income tax incentives. The implementation of Goods and Services Tax (GST) since July 1st, 2017, integrating multiple state and central taxes, has further streamlined tax compliance. Moreover, initiatives such as online filing of income tax returns and the introduction of the e-verification system have significantly reduced the time and effort required for tax preparation and submission, marking a shift towards digitization and efficiency in tax administration, and contributing to the EoDB.
- Trading Across Borders:
In efforts to streamline trading across borders, the Indian government has introduced several initiatives. The “Indian Customs Single Window Project,” established by the Central Board of Excise and Customs (CBEC), allows exporters and importers to electronically submit their customs clearance documentation at a centralized location. Additionally, the launch of PCS1x aims to consolidate 27 maritime stakeholders onto a single platform, while the implementation of the e-Sanchit system has reduced the required documents for importing and exporting goods to just three essentials, all submitted electronically. Furthermore, exporters benefit from reduced time and costs with automatic self-sealing of containers at factories. Enhanced transparency is achieved through a computerized risk management system, leading to a significant decrease in customs inspections. Moreover, the Central Board of Indirect Taxes and Customs has introduced the Advance Import Declaration, allowing for an ‘Advance Bill of Entry’. These measures collectively aim to facilitate smoother trade processes and improve efficiency in cross-border transactions.
- Production Linked Incentive (PLI) Scheme:
The PLI scheme aims to bolster India’s manufacturing sector by incentivizing both domestic and foreign investments, fostering the development of global leaders across 14 strategic sectors. Targeted incentives and support are provided to key industries such as electronics, automobiles, pharmaceuticals, and MedTech devices, encouraging investment in areas where India holds potential for global leadership. Companies are urged to enhance their manufacturing capabilities by investing in plant, machinery, R&D, and technology transfer, with the government offering incentives for up to five years based on increased manufacturing, tailored to the specific requirements of each sector.
- Shram Suvidha Portal:
Shram Suvida Portal is a one-stop shop for Labour Laws compliance. It consolidates information on labour inspection and its enforcement. It promotes the use of a common Labour Identification Number (LIN) to comply with more than 40 labor laws.
- Free trade Agreements (FTAs):
India has been talking free trade agreements with several partners – both bilateral and regional – in a bid to boost export-oriented domestic manufacturing. These FTAs cover a wide array of topics, such as tariff reduction impacting the entire manufacturing and the agricultural sectors, rules on services trade, digital issues such as data localization, intellectual property rights that may have an impact on the accessibility of pharmaceutical drugs, and investment promotion, facilitation, and protection. India has signed 13 FTAs in the last five years with its trading partners, including the India-Mauritius Comprehensive Economic Corporation and Partnership Agreement (CECPA), India-UAE Comprehensive Partnership Agreement (CEPA – in effect from May 2022), India-Australia Economic Cooperation and Trade Agreement (Ind Aus ECTA – in effect from December 29, 2022), and Trade and Economic Partnership Agreement (TEPA) with European Free Trade Association (EFTA) countries comprising Switzerland, Iceland, Norway & Liechtenstein. India is actively negotiating with the UK, Canada, EU, and Israel to conclude FTAs.
CONCLUSION:
The EoDB rankings are integral to the AtmaNirbhar Bharat Abhiyaan (Self-Reliant India Initiative). The government aims to create a conducive environment for both domestic and foreign investments by simplifying procedures and improving governance. Collaboration with various stakeholders and a commitment to international best practices are the driving forces behind this endeavour.
Since 2014, The Department for Promotion of Industry and Internal Trade (DPIIT) has been driving change, collaborating across sectors to implement reforms under the EoDB Project and the Business Reform Action Plan. The mantra of “Minimum Government, Maximum Governance” has solidified India’s position on the global stage.
Prime Minister Modi’s vision emphasizes governance over government, leading to tangible improvements in the business ecosystem. While significant progress has been made, there is a continued commitment to further enhance the EoDB, ultimately aiming to improve the Ease of Living for every citizen of India.
