Underlining that India needs "transformative reforms" to boost its economy, the World Bank today said the country has witnessed "fast-paced" reforms in past two years with the government encouraging digitisation, streamlining electricity supply and supporting manufacturing.
"The country has embarked on a fast-paced reform path," the international lender's annual report on Ease of Doing Business 2017 Report said in a special India-specific box.
The report "acknowledges several substantial improvements".
Titled 'India has embarked on an ambitious reform path', the report said that the current Indian government was elected in 2014 on a platform of increasing job creation, mostly through encouraging investment in the manufacturing sector.
Soon after the elections policymakers realised for this to happen substantial improvements would be needed in India's overall business regulatory environment, it said adding that 'Doing Business' indicators were employed as one of the main measures to monitor improvements in India's business climate.
"As a result of the election platform-driven reform agenda, over the past two years the 'Doing Business' report has served as an effective tool to design and implement business regulatory reforms," the report said.
The data presented by 'Doing Business' indicators have led to a clear realisation that India is in need of transformative reforms. The World Bank said India has achieved significant reductions in the time and cost to provide electricity to businesses.
In 2015-16, the utility in Delhi streamlined the connection process for new commercial electricity connections by allowing consumers to obtain connections for up to 200 KW capacity to low-tension networks.
"This reform led to the simplification of the commercial electricity connection process in two ways. First, it eliminated the need to purchase and install a distribution transformer and related connection materials, as the connection is now done directly to the distribution network, leading to a reduction in cost," it said.
"Secondly, the time required to conduct external connection works by the utility has been greatly reduced due to the low-tension connection and there is no longer a need to install a distribution transformer."
As a result, the time needed to connect to electricity was reduced from 138 days in 2013-14 to 45 days in 2015-16. And in the same period, the cost was reduced from 846 per cent of income per capita to 187 per cent.
India further made paying taxes easier by introducing an electronic system for paying employee state insurance contributions, the World Bank said.
In the area of trade, as of April 2016 the Customs Electronic Commerce Interchange Gateway portal allowed for the electronic filing of integrated customs declarations, bills of entry and shipping bills, reducing the time and cost for export and import documentary compliance, it noted.
The rankings are based on ten parameters -- starting a
business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
India has improved its ranking with respect to various areas. In terms of getting electricity, the country's position has jumped to 26th spot from 51st place last year.
When it comes to trading across borders, the ranking has moved up one place to 143, and in enforcing contracts the rise is of six spots to 172nd position.
However, with respect to starting a business, the ranking has slipped four places to 155th spot and in the case of dealing with construction permits by one rank to 185th.
As per the report, India's ranking in terms of protecting minority investors dropped to 13th place from 10th position last year.
With regard to getting credit, the ranking has fallen by two places to 44.
Explaining as to why India's reform efforts is not being reflected in the ease of doing business report, Lopez-Claros said it very often takes some time for the reforms implemented by governments about the regulatory environment to be felt on the ground by the business community.
Rita Ramalho, Manager of the Doing Business project said that there were in fact improvements this year.
"There are four areas of improvement this year in India - getting electricity, trading across border, enforcing contracts and paying taxes," Ramalho told
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Lopez-Claros said there are only 34 economies that actually improved more than India in the particular measure of distance to frontier metrics.
"You have to focus on distance to frontier metrics if you want to know what is going on India at this moment. The fact that it has gone up by couple of percentage points, is a reflection of the changes in Indian regulations," he noted.
He stressed simply saying that "130th rank means that there is no change in the business environment in India is completely unfair to the government".
"There is a small change in the relative measure, but in absolute measure which is a reflection of what is happening in India, there has been a remarkable improvement," he observed.
"We have been impressed by the effort, the seriousness of the reforms being implemented. You can be sure, we would very much like to see this progress quickly reflected on the ground," Lopez-Claros said.
According to Lopez-Claros, Prime Minister Narendra Modi's ambition of bringing India within first 50 ranking in the ease of doing business is achievable.
"It is achievable. I do not think that it is unreasonable. We can talk about the time frame, but if you ask me does the government have the technical capacity the ability to implement and conceptualise reforms that could in the medium-term lead to substantial improvement in ranking, my answer is yes. I have full confidence. The effort has to be sustained. That's all I am saying," he said.
While noting that moving from 130 to less than 50 is not going to happen in 12 months, Lopez-Claros said what is important is direction of change.
"And we are comfortable that the direction of change is the correct one because we see improvement in the distance from the frontier score," he added.
World Bank Chief Economist and Senior Vice President Paul Romer said simple rules that are easy to follow are a sign that a government treats its citizens with respect. "They yield direct economic benefits - more entrepreneurship; more market opportunities for women; more adherence to the rule of law," he noted.
