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What Corporate India Needs To Emerge As A Top Destination In The Ease Of Doing Business

The EODB steps achieved via various reforms have attracted global attention. As a result, the country’s EODB ranking has jumped from 130 in 2016 to 100 in 2017 – an incredible leap of 30 places within a year

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Since assuming power in May 2014, the NDA Government led by Prime Minister Narendra Modi has implemented many radical economic reforms in increasing the Ease of Doing Business (EODB). Multiple measures have also been undertaken in controlling inflation and the fiscal deficit while boosting jobs creation and reviving the manufacturing sector.

In particular, the EODB steps achieved via various reforms have attracted global attention. As a result, the country’s EODB ranking has jumped from 130 in 2016 to 100 in 2017 – an incredible leap of 30 places within a year. One of the common-sense measures, the Centre took, was in scrapping more than 1,150 archaic laws within two years of gaining power. Most of these outdated norms enacted during British days were serving no purpose other than impeding progress. 

But scrapping outdated laws addressed just one side of the coin. A major measure exerting a salutary impact in boosting EODB was deploying ICT in overriding the maze of laws hobbling Indian industry. ICT enabled the authorities to implement single-window clearance in many cases. 

In its EODB index leap, India improved its rankings in six of the 10 sub-categories the World Bank used in judging the nation’s EODB business climate. These included improved efficiency in allocating construction permits, paying taxes, opening a new business and resolving cases of insolvency.

Besides incremental and major reforms, the Centre acted boldly in introducing a big bang reform
such as the Goods and Services Tax. GST’s introduction in July 2017 helped transform the country’s 29 states into one market with a ‘one’ tax rate. Of course, initially, five tax slabs – 0%, 5%, 12%, 18% and 28% – are in operation to minimise difficulties during the transition period. 

Although the logic is understandable, multiple GST slabs are proving somewhat counterproductive. Apart from creating confusion about items being exempt or not, the cost of servicing multiple slabs
is a complex, expensive exercise. The sooner the nation moves towards a single or dual GST
structure, the better for everyone. One hopes the Government considers rationalising the GST
structure at the earliest. In turn, this will provide regulatory stability in the market. 

Yet, despite diverse enabling measures, doing business in India remains challenging. For instance, most businesses still require a multiplicity of permissions to get going, which can take months together or more. Due to these issues, the compliance costs of business are still high.

Just as GST subsumed dozens of state and local laws and levies, a similar initiative is essential in
pruning the various modalities of establishing a new business. An online single-window clearance
regimen would be best in increasing transparency and helping corporates to expand or establish
their business, as required.

The complexity of laws only makes it more difficult to run seamless operations. Significantly, states
rising in EODB rankings are those initiating online single-window clearance for project approvals.
This promotes transparency, making it impossible for middlemen to operate safely.

The other issues that need addressing in making India a top EODB destination are simplifying land
acquisition laws, which remain cumbersome; reducing the time and processes required in receiving
construction permits; improving investor protection and enforcement of contracts; and simplifying
taxation modalities, among others. When this happens, India will finally emerge as one of the top
EODB destinations worldwide.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Independence day 2018 Magazine 18 August 2018

Anil Gupta, Chairman and MD of Kei Industries Ltd

The author is Chairman and MD of Kei Industries Ltd

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