MACROECONOMICS

PRESENTATION
EASE OF DOING BUSINESS IN INDIA
Group 10
Neha Malhothra
Kajol Makwana
Santhi Krishna
Prativa Biswas
Sathish Kumar

Ease of doing business index

The ease of doing business index is an index formulated by the World
Bank Group which indicates the ease of doing business in a country.
Higher rankings (a low numerical value) indicate better, usually simpler,
regulations for businesses and stronger protections of property rights.
Empirical research funded by the World Bank to justify their work show
that the effect of improving these regulations on economic growth is strong.
The index is based on the study of laws and regulations, with the input and
verification by more than 9,600 government officials, lawyers, business
consultants, accountants and other professionals in 185 economies who
routinely advise on or administer legal and regulatory requirements.
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INDICATORS FOR
MEASURING EASE OF
DOING BUSINESS IN INDIA:

Doing Business measures the ease of

starting and operating a business by
recording all procedures officially
required by an entrepreneur to start
up and operate a company.

Number of procedures to legally start and operate a co

PROCEDURE:
A procedure is defined as any interaction of the company founders with
external parties (for example, government agencies, lawyers, auditors or
notaries).

TIME:

The measure captures the median duration that incorporation lawyers

indicate is necessary in practice to complete a procedure with minimum
follow-up with government agencies and no extra payments.
It is assumed that the minimum time required for each procedure is 1 day.

COST
Cost is recorded as a percentage of the economys income per capita. It
includes all official fees and fees for legal or professional services if such
services are required by law

Paid-in minimum capital

The paid-in minimum capital requirement reflects the amount that the
entrepreneur needs to deposit in a bank or with a notary before
registration and up to 3 months following incorporation and is recorded as
a percentage of the economys income per capita. The amount is typically
specified in the commercial code or the company law
4

Economies covered by Ease

Of Doing Business report

THE 10 PARAMETERS
The index is calculated as the ranking on the simple average of
its percentile rankings on each of the 10 topics namely

Ease of Starting a Business

in India Over time

India's ranking
145
140

India's ranking

135
130
125
2011

2012

2013

2014

2015

DOING BUSINESS 2015 is a World Bank Group flagship

publication measuring the regulations that enhance business
activity and those that constrain it. Doing Business presents
quantitative indicators on business regulations and the
protection of property rights that can be compared across 185
economies

Vishakhapatnam
Navi Mumbai
Gurgaon
Kolkata
Noida
Calicut
Jaipur
Vadodra
Mangalore
Hyderabad
Chandigarh
Kochi
Nagpur
Ahmedabad
Coimbatore
Bhubaneswar
Indore
Pune
Mumbai
Chennai
Bangalore

21
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4

Rankin
g of
Cities
in 2015

3
2
1

source:Report of GIREM and DTZ

Limitations
1. The collected data refer to businesses in the economys largest business
city and may not be representative of regulation in other parts of the
economy. To address this limitation, sub national Doing Business
indicators were created.
2. The data often focus on a specific business formgenerally a limited
liability company of a specified sizeand may not be representative of
the regulation on other businesses.
3. Transactions described in a standardized case scenario refer to a specific
set of issues and may not represent the full set of issues a business
encounters.
4. The measures of time involve an element of judgment by the ex-pert
respondents. When sources indicate different estimates, the time
indicators reported in Doing Business represent the median values of
several responses given under the assumptions of the standardized case.
5. The methodology assumes that a business has full information on what is
required and does not waste time when completing procedures

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STARTING BUSINESS
Records the procedures, time and cost for a business to obtain all
the necessary approvals to start business
Starting a business requires 11.9 procedures,
takes 28.4 days, costs 12.2% of income per
capita and requires paid-in minimum capital of
111.2% of income per capita

Previous
Year:
156th
Rank
11

Starting a business

CHANGES OVER NUMBER OF

PROCEDURE FOR STARTING BUSINESS:

PROCEDURE: India still follows the same

number of 12 procedures making no changes
since 2004.

TIME: India takes 29 days, New

Zealand ranks first as it takes only
a day to complete registration
process.

COST: In India, it is somewhere around

12.2% of per capita income. The cost of
completing the procedure has reduced
significantly from 80% in 2007 but it is
still above average

PAID-IN MINIMUM CAPITAL: amount that has to be

deposited in the bank or with notary before
registration or within 3 months of registration. In
India, paid-in minimum capital is around 111.4% of
per capita income. Though there has been a drastic
reduction in the amount to be paid but this is still
much higher

CONSTRUCTION PERMITS
Records the procedures, time and cost for a business to obtain all
the necessary approvals to build a simple commercial warehouse

Dealing with construction permits in

India requires 25.4 procedures, takes
185.9 days and costs 28.2% of the
warehouse value

Previous
Year:
183rd
Rank
17

Dealing with construction permits: building a

warehouse

GETTING ELECTRICITY

Records all procedures required for a local business to obtain a

permanent electricity connection and the time and cost to complete
them

Getting electricity there requires

7.0 procedures, takes 105.7 days
and costs 487.7% of income per
capita

Previous
Year:
134th
Rank

19

REGISTERING PROPERTY
Records the full sequence of procedures necessary for a business to
purchase property from another business and transfer the property title
to the buyers name

Registering property in India requires s 7.0

procedures, takes 47.0 days and costs
7.0% of the property value

Previous
Year:
115th
Rank

20

GETTING CREDIT
Assesses the sharing of credit information and the legal rights of
borrowers and lenders with respect to secured transactions

Previous
Year:
30th
Rank

21

PROTECTING INVESTORS
Measures the strength of minority shareholder protections against
directors use of corporate assets for personal gainor self-dealing

Previous
Year:
21st
Rank

22

PROTECTING MINORITY INVESTORS

* DATA SOURCE : WORLD BANK REPORTON DOING BUSINESS

PAYING TAXES

WHERE INDIAN ECONOMY STAND

TODAY?

On average, firms make :

33 tax payments a year.
Spend 243 hours a year filing.
Preparing and paying taxes and pay
total taxes amounting to 61.7% of
profit.

Previous
Year:
154th
Rank
*Threshold is the highest total tax
rate among the top 15% of
economies in the ranking on the total
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tax rate. Calculated yearly basis.

Paying taxes

* DATA SOURCE : WORLD BANK REPORT ON DOING BUSINESS

TRADING ACROSS BORDERS

Exporting a standard container of
goods requires 7 documents, takes
17.1 days and costs $1332.0.
Importing the same container of
goods requires 10 documents, takes
21.1 days and costs $1462.0

Previous
Year:
122nd
Rank

26

TRADING ACROSS BORERS

ENFORCING CONTRACTS
Measures the efficiency of the judicial
system in resolving a commercial
dispute before local courts
Contract enforcement takes 1420.0 days,
costs 39.6% of the value How
of the
Indiaclaim
and and
requires 46.0 proceduresComparator economies
rank on the ease of
enforcing contracts

Previou
s Year:
186th
Rank

28

 A judiciary can be improved in different ways.

Higher-income economies tend to look for ways to enhance
efficiency by introducing new technology.
Lower-income economies often work on reducing backlogs by
introducing periodic reviews to clear inactive cases from the
docket and by making procedures faster

Source: Doing Business Report, World Bank

Diagrammatic PresentationComparison
Indicator
s

India South
Asia

OEDC

TIME

142
0

539

1600
1400
1200
1000
800
600
400
200
0

1069

Indicators

Indi
a

South
Asia

COST

39.6

30.4

21.4

46

43.3

31.5

PROCEDUR
E

OEDC

50
40
India
South Asia
OEDC

20
10
0

Time

India
South Asia
OEDC

30

Cost Procedure

Strategies Successful
enforcement of contract

Technology can be proven and pioneered in court procedure

Floppy disks / CD drives used to save the case files
Electronic case management system can be used to make it more efficient and used
friendly
Implementing electronic case file system enabling the following
In terms of TIME New services like
Electronic submission
Registration
Service notification
Access to court documentation
In terms of PROCEDURE - making it
Secure
Timely
Transparent
Just
In terms of COST - implementing
E-court services

RESOLVING INSOLVENCY
A robust bankruptcy system functions as a filter, ensuring the survival
of economically efficient companies and reallocating the resources of
inefficient ones.
By improving the expectations of creditors and debtors about the
outcome of insolvency proceedings, well-functioning insolvency
systems can facilitate access to finance, save more viable businesses
and thereby improve growth and sustainability in the economy
overall.

How India and

comparator economies
rank on the ease of
resolving insolvency

Previous
Year:
135th
Rank

32

CHANGES OVER TIME IN

PARAMETERS FOR RESOLVING
INSOLVENCY
TIME: Time
taken to
resolve
insolvency
has been
constant at
4.3 years
since 2004
and there has
been no
change till
today.

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 COST REQUIRED
TO RECOVER
DEBT: includes
court fees,
lawyers fees
and other
related fees and
for India it is
around 9% of
debtors estate.
Source: Doing Business report World Bank

RECOVERY
RATE:
measures the
cents on the
dollar
recovered by
creditors,
present value
of debt
recovered etc.
In India, the

Strategies Successful
Resolution of Insolvency

Assistance from World Bank

World Bank Group has worked with more than 70 countries to assist reform
programs aimed at improving the regulatory environment for businesses in areas
covered by the Doing Business project, such as business registration, construction
permitting or insolvency reforms

Encouraging small and medium size entrepreneurship

Amendments in companies act

By Implementation of more business friendly regulatory environment for domestic

companies
Amendments to be made considering specifically to the doing business parameters

Going for concern sale

Regarding outcome recovery rates are higher in concern sale than that of piecemeal
liquidation which is true in case of India according to the Board of Industrial And
Financial Reconstruction

Minimum Wage (US$ Per

Month)

EMPLOYING WORKERS
Minimum wage for a 19year-old worker or an
apprentice over time

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COMPARISON WITH BRICS

0
20
40
60
80

South Africa
China
Russian Federation
Brazil
India

100
120
140
160
180
200

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Regulations affecting ease

of doing business
Retrospective taxation means old proceedings are being taxed as per the new rules. It has the
undesirable effect of creating major uncertainties in the business environment and constituting a
significant disincentive for persons wishing to do business in India.
Taxation of overseas M&A deals: The Indian Tax Authorities have in recent past questioned the Indian
tax impact of overseas M&A deals involving transfer of shares of an Indian company. The matters are
being fiercely litigated.
India is perceived to have a relaxed attitude towards intellectual property rights, creating uncertainty
for foreign firms.
The Indian exchange control regulations contained in the Foreign Exchange Management Act, 1999
govern cross-border transactions involving movement of foreign exchange into and out of India
While Current account transactions are freely permitted unless restricted, Capital account transactions
are generally restricted in India unless specified.

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Regulations affecting ease

of doing business

Neighbouring State Governments have vastly differing legislations on labour, land

acquisition, commercial taxes, priority sector categorisation for incentives, and intrastate
movement of goods.

The risk of an uncertain regulatory environment.

Foreign investment policy : FDI caps/approval/condition apply for certain sectors

FDI is not permitted in certain sector such as real estate, lottery, gambling, atomic energy, etc

The process of land acquisition in India has proven unpopular with the citizenry. The
amount reimbursed is fairly low with regard to the current index of prices prevailing in the
economy. Furthermore, due to the low level of human capital of the displaced people, they
often fail to find adequate employment. There have been a rising number of political and
social protests against the acquisition of land by various industrialists.

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Regulations affecting ease

of doing business
Indias chronic infrastructure and logistics deficit with inefficient
transport networks makes it tough for manufacturing companies to achieve
just-in-time production.
Rigidity in labour laws imposes significant cost due to provisions in Industrial
dispute act.
Bureaucracy makes regulatory procedures and systems in India particularly
complex, meaning that foreign managers must spend time learning about how
things work.
Lack of Directors Liability in areas such as paying back profits and damages
to shareholders in case of wilful damage.
40

Recent issues

Vodafone and Nokia encountered tax dispute with the Indian Income Tax Department.

Motorola Mobility has closed down its India website and is reducing headcount in the
worlds second largest mobile phone market in terms of subscribers amid rising operational
costs.

Tata Motors pulled out of Singur where the proposed Nano factory was planned due
to controversy generated by land acquisition

Tata Motors Jaguar Land Rover (JLR) opened its first plant $1.78-billion in Changshu,
China.

Delta Airlines Inc., United Airlines Inc. and Chrysler Group Llc decided to shift its call
centre operations from India to the US.

Number of Indian enterprise technology companies are now shifting base out of the country
to grow faster. Lack of sufficient risk capital, not enough profitable exits for investors and
fewer customers willing to experiment with technology are making hordes of entrepreneurs
41
take this decision.

Recent tax and regulatory updates

External Commercial Borrowing (ECB) policy liberalized to include the payment for import
of service, technical know-how and license fees as part of import of capital goods by the
companies for use in the manufacturing and infrastructure sector, subject to compliance of
certain conditions.

Recently, the Government of India has announced the reforms in the FDI policy by listing out
FDI relaxation in various sectors including telecom, petroleum & natural gas refining,
defence, single brand retail trading, multi brand retail trading, courier services, asset
reconstruction companies, commodity exchanges, power exchanges, stock exchanges and
credit information companies. It also allowed e-auction of coal mines.

The policy is liberalised to allow trade credit to companies operating in all sectors up to 5
years for import of capital goods as classified by Director General of Foreign Trade (DGFT).

The Factory Act 2013 introduced enhanced corporate governance standards particularly in
relation to the e-governance, independent directors, audit, accounts, Corporate Social
Responsibility, mandatory valuation, private placement of securities, small company concept,
cross-border mergers, class action suits, related party transaction etc
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Recent tax and

regulatory updates
The 2013 land acquisition Act focuses on providing not only compensation
to the land owners, but also extend rehabilitation and resettlement benefits to
livelihood looser from the land, which shall be in addition to the minimum
compensation. The minimum compensation to be paid to the land owners is
based on a multiple of market value and other factors laid down in the Act.
The Apprenticeship Act has been updated to facilitate increased private
participation in vocational training, compliance requirements for central
labour laws have been simplified and forest- and labour-related clearances
are being moved online.
GSTsingle goods and services taxthat would replace the
complex system of nearly 20 different taxes and levies
imposed on commodities by different states.
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Department of industrial policy

and Promotion
India has set a target of making it to the top 50 countries in the World Bank's 'Ease of
Doing Business' index by 2016.
Approving a three to six month timeframe for various government ministries/departments to
implement a slew of regulatory reforms, aimed at making India an attractive investment
destination.
DIPP has been designated as the nodal agency for removing the barriers, has identified a
list of issues from various ministries/departments, which need to be addressed to improve
India's ranking.
A comparative study of practices followed by the States for grant of clearance and ensuring
compliances was conducted, six best practices were identified, important bottlenecks faced
by industries and important steps required to improve the business environment in States.

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DIPP Major Initiatives on

Improving Ease of Doing
Business in India
Application forms for Industrial Licence (IL) and Industrial Entrepreneur Memorandum
(IEL) have been simplified and has been made online
Certain Defence products has been excluded from the purview of industrial licensing
Initial validity period of Industrial License has been increased to three years from two
years.
MHA has stipulated that it will grant security clearance on Industrial Licence
Applications within 12 weeks
Checklist with specific time-lines has been developed for processing all applications
filed by foreign investors in cases relating to foreign investments.

45

DIPP Major Initiatives on

Improving Ease of Doing
Business in India
An Investor Facilitation Cell has been created in Invest India to guide, assist and handhold
investors during the entire life-cycle of the business.
The registration with Employees Provident Fund Organization (EPFO) and Employees
State Insurance Corporation (ESIC) have been automated.
DIPP has requested all Secretaries of Government of India and Chief Secretaries of the
States/UT to simplify and rationalize the regulatory environment.
DIPP is implementing the eBiz project which will create an investor centric hub-and-spoke
online single window model for providing clearances and filing compliances.
NIC Code NIC 2008 will allow Indian businesses to be part of globally recognized
classification that facilitate smooth approvals/registration.
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Transnational entrepreneurs
Transnational entrepreneurs (TEs) are individuals that migrate from one
country to another, concurrently maintaining business- related linkages
with their former country of origin, and currently adopted countries and
communities.
A recent study by the World Bank on the Remittance Market in India
Box 1 Remittances from the Indian Diaspora 3 has pointed out that
remittance inflows into India are some 4% of GDP and have surpassed
both foreign aid flows and foreign direct investment (FDI).
While India received nearly $21 billion from overseas Indians in 2003,
the figure jumped to $64 billion in 2011

Transnational
entrepreneurs
Transnational entrepreneurship
contribute to the economic
development of their country of origin.
Support for entrepreneurs and small businesses in the country of
origin.
Unique combination of ownership advantages, which extend from
their expertise and the networks they have established at different
places, to their ability to forecast new developments in the country
of origin.
They have better knowledge and relationship opportunities that
other investors lack.
Combine this knowledge with the skills, knowledge and networks
they have cultivated abroad, yielding important synergistic
advantages.

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