The ease of doing business in India: progress and challenges

India, one of the fastest-growing economies in the world, has made significant strides in improving its business environment over the past decade. With a growing market of over a billion people, coupled with reforms initiated by the government, the country has become an attractive destination for both domestic and international businesses. In this post, we’ll explore the factors that have contributed to India’s improved Ease of Doing Business (EODB) ranking, the challenges that remain, and the opportunities for future growth.

India’s performance in the ease of doing business rankings

India’s journey in the Ease of Doing Business rankings, published annually by the World Bank, has been a remarkable one. The country’s rank improved from 142 in 2014 to 63 in 2020, signaling significant progress. Several key reforms contributed to this improvement:

Simplification of Taxation: The introduction of the Goods and Services Tax (GST) in 2017 unified India’s indirect tax system, reducing the complexities businesses faced in complying with different state tax laws.
Insolvency and Bankruptcy Code (IBC): Launched in 2016, the IBC has streamlined processes for resolving insolvencies and has significantly improved the time taken for businesses to resolve insolvency.
Digitization of Processes: Many government services, such as company registration and tax filings, have been moved online, reducing bureaucracy and the time required to start a business.

Key reforms driving improvement

India’s government has launched several initiatives aimed at making the country a business-friendly destination. Some of the notable reforms include:

Make in India: Launched in 2014, this initiative promotes manufacturing and aims to attract investment across various sectors, including electronics, pharmaceuticals, and textiles.
Digital india: A push to digitize the economy, Digital India has made starting and running businesses easier by offering e-governance, improving digital infrastructure, and fostering digital literacy.
Single-window clearance: This reform allows businesses to apply for necessary licenses and approvals through a single platform, reducing delays and enhancing transparency.

These reforms have made starting a business, dealing with construction permits, and paying taxes much easier, significantly improving India’s overall ranking.

Challenges to overcome

While India has made significant progress, several challenges continue to affect the ease of doing business:

Complex land acquisition laws: The process of acquiring land for business purposes remains cumbersome and time-consuming. Reforming land laws is essential for facilitating large-scale infrastructure and industrial projects.
Regulatory complexity: Despite the introduction of online systems, compliance with multiple state and central regulations can be overwhelming, especially for small and medium-sized enterprises (SMEs).
Infrastructure deficiencies: Although infrastructure development has improved, challenges related to logistics, road networks, and port efficiency continue to hinder business operations, particularly in remote regions.
Judicial delays: The legal system in India is notoriously slow, especially in matters related to commercial disputes. Lengthy court cases increase the cost of doing business and create uncertainty.

Opportunities for growth

Despite the challenges, India remains a highly attractive market with immense growth potential. Here are some reasons why businesses should look at India as a promising destination:

Expanding middle class: India’s burgeoning middle class presents a significant market for a wide range of products and services, from consumer goods to financial services.
Government support for tnnovation: The government’s focus on innovation, entrepreneurship, and start-ups has created a conducive environment for tech-driven businesses, particularly in sectors like fintech, edtech, and healthtech.
Foreign Direct Investment (FDI): India has liberalized its FDI policies in key sectors such as defense, retail, and manufacturing, providing opportunities for foreign investors.

Conclusion

India’s improving ease of doing business is a testament to the country’s efforts to create a more business-friendly environment. However, for India to climb higher in the rankings and compete with the likes of China and other developed markets, there is a need to continue reforms, particularly in areas like land acquisition, regulatory simplification, and infrastructure development. As India positions itself as a global hub for business, both domestic and international players will find plenty of opportunities for growth, innovation, and success in this dynamic market.