Ease of doing business: It takes 118 days to set up biz in India, says NITI

Panagariya says huge gap between perception of enterprises and action taken by state governments

It takes 118 days on an average to set up a business in India, showed a survey of enterprises on ease of doing business, conducted by the  Niti Aayog and Mumbai-based IDFC Institute. 

The findings of the Enterprise Survey were at sharp variance with the World Bank report, which showed that it took just 26 days to set up a business in India in 2016.

The World Bank covered only Delhi and Mumbai to prepare its report, while the Niti-IDFC Institute surveyed pan-India, except Arunachal Pradesh, Mizoram, Andaman and Nicobar, and Lakshadweep.

The results of the two reports were different on other parameters as well (see chart). 

While it took 118 days on an average to start a business in the country, there were inter-state differences. Tamil Nadu, the best-performing state, managed to do this in 63 days. Land allotment took 156 days nationally and 28 days in Himachal Pradesh. Environmental approval took 91 days nationally and 25 days in Chhattisgarh.

 Niti Aayog’s  outgoing Vice-Chairman Arvind Panagariya said there is a huge gap between what the state governments have done to improve the ease of doing business and what the enterprises know of these improvements. 

“For instance, on single-window clearance: Are enterprises even aware of this facility? We got surprising results,” he said.

He said even among start-ups — which were set up in the last three years — only 20 per cent of them said they were aware of the existence of single-window facility.

According to the report, even among the experts, only 41 per cent reported having knowledge of the existence of the facility.

Besides wider coverage, the Aayog’s report, unlike the World Bank, interviewed firms rather than only experts and officials.  The Aayog report is focused on organised manufacturing, covering 3,000 firms across 23 sectors, while the World Bank report covers both manufacturing and services.

At an event of the launch of the survey, ministers slammed the World Bank report on ease of doing business, which ranked India way below at 130th position, compared to the  government’s ambition of placing the country at 50th rank.

“The World Bank’s Ease of Doing Business Report merely talks to a few people in Delhi and Mumbai,” Commerce Minister Nirmala Sitharaman said. Law and Information Technology Minister Ravi Shankar Prasad said forming a perception on ease of doing business by just talking to a few people was not the right approach.

 The report found that it took enterprises two years on average to resolve a legal dispute. Firms faced 46 hours of power cuts in a typical month. A staggering 68 per cent of enterprises were unaware of the single-window system of industry clearances. The survey found 46 per cent of firms did not have problems in sourcing financial assistance. Only 32 per cent of firms borrowed from banks.