India’s Doing Business Dreams – Lessons to Learn From Russia

India’s goal to achieve a ranking of 50th globally in Doing Business 2019 is a difficult task and will involve mammoth policy changes focused on improving the ten parameters used to calculate the Doing Business rankings. The country has the advantage of being backed by a government that is eager to improve the business environment. Following Russia’s example of achieving a rank jump of 67 positions from 118th out of 183 economies in Doing Business 2012 to 51st out of 189 countries in 2016, India should focus on improving its worst-performing categories such as dealing with construction permits, enforcing contracts and paying taxes, which would increase its overall Doing Business ranking.

India’s Ease of Doing Business Sub-category Rankings: 2014 and 2016

Indias ease of doing business

Source: Euromonitor International from Doing Business, World Bank

Note: Regulations in Doing Business 2014 and Doing Business 2016 are measured from June 2012 until June 2013 and June 2014 until June 2015, respectively. The data for all sets of indicators in Doing Business 2014 are from June 2012 until June 2013 (except for paying taxes data which refers to January–December 2012).The data for all sets of indicators in Doing Business 2016 are from June 2014 until June 2015 (except for paying taxes data which refers to January–December 2014).Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across economies. A high ranking means the regulatory environment is conducive to the operation of business. Total number of countries used in for analysis in Doing Business 2014 and Doing Business 2016 were 189.

Change in government attitude brings in the largest increase in ranking between 2014 and 2016

The post 2014 parliamentary elections brought with it the business-friendly Bharatiya Janata Party (BJP). The party’s major focus was to bring India’s business environment on a par with international levels, with Prime Minister Narendra Modi signing various foreign investment related deals. A significant deal in 2015 was the Japanese US$34 billion (according to trade sources) investment in India until 2019. Hence, the country has loosened restrictive laws associated with foreign investment inflows, signalling a slight improvement in the regulatory environment. Relaxation of foreign investment laws were also coupled with business-improving reforms such as using the Internet to file for an electric connection in 2015. These initiatives led to the largest rank improvement from 140th in Doing Business 2014 to 130th in Doing Business 2016 (both out of 189 countries). However there is still a lot of work to be done to achieve India’s dream ranking in 2019, especially with regards to its poorly performing categories in Doing Business 2016, such as ‘Dealing with Construction Permits’ at 183rd rank, ‘Enforcing Contracts’ at 178th rank and ‘Paying Taxes’ at 157th rank.

Increase in the frequency of policies required for an average rank increase of 27 per year

India’s rank increase per year from 2014 to 2016 was only five ranks, nowhere near the rank rise of 27 required on a yearly basis to achieve a ranking of 50th in Doing Business 2019. While the country is committed to the introduction of business-improving tax reforms, such as the 2016 goods and services tax these reforms are too few to cause a significant change in ranking. In 2015, India only came up with two major business oriented reforms involving the reduction of minimum capital required to start a business and the removal of internal wiring inspections to get an electricity connection. These reforms resulted in a rise in ranking from Doing Business 2015 to 2016 for the ‘Starting a Business’ category from 164th to 155th and ‘Getting Electricity’ category from 99th to 70th , respectively. Hence, improvement in India’s ranking will require laws focused across the other eight categories as well whose improvement is also imperative for an overall Ease of Doing Business 2019 rank increase.

Russia’s initiative to reduce business-obstructing procedures is something India should aim for

Russia’s jump of 67 ranks from 2012 to 2016, from 118th in Doing Business 2012 (out of 183 nations) to 51st in Doing Business 2016, can be attributed to the increase in ranking of its worst-performing categories. The ‘Getting Electricity’ category went from 184th ranking in Doing Business 2012 to 29th in Doing Business 2016, ‘Starting a Business’ jumped from 105th ranking to 41th during the same years and ‘Dealing with Construction Permits’ also rose in ranking from 180th to 119th . Russia’s rise in its categories clearly indicates that it is indeed possible to increase the Doing Business ranking within a short frame of time.

Ease of Doing Business Rankings for Russia and India: 2012-2016

ease of doing business india v russia

Source: Euromonitor International from Doing Business, World Bank

Note: Regulations in Doing Business 2016 are measured from June 2014 until June 2015. The data for all sets of indicators in Doing Business 2016 are from June 2014 until June 2015 (except for paying taxes data which refers to January–December 2014). Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across economies. A high ranking means the regulatory environment is conducive to the operation of business.