Exclusive | Centre works on new ease of doing business reforms

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The Centre is planning an overhaul of processes and procedures that will help improve the ease of doing business in India. The overhaul, to be carried out in the current calendar year, will include a new set of guidelines to examine challenges that businesses face and also measures to remove them.

The government is keen to infuse a fresh approach in the evaluation of ease of doing business, as the current parameters are based on the World Bank's now-discredited global index.

Government officials told Moneycontrol that the Department for Promotion of Industries and Internal Trade (DPIIT) is planning a nationwide exercise to upgrade the action plan to cut red tape and attract more foreign direct investment (FDI).

After adhering to the World Bank guidelines for six years, India has found itself in a spot as the global rankings themselves have been discredited.

Back in September 2021, it emerged that the multilateral institution had manipulated data and ultimately rigged a national ranking for China for several years.

Senior leadership such as World Bank president Jim Yong Kim and then chief executive Kristalina Georgieva, and current managing director of the International Monetary Fund, had been implicated in the findings.

India’s ranking jumps

As a result, scrutiny and doubt had been cast on the performance of all nations, as captured in the Doing Business reports. India's ranking had improved dramatically since the Narendra Modi government took charge in 2014.

The government had publicly declared its target of breaching the club of the top 50 easiest countries to do business in. It also initiated a wide sweep of reforms to continuously improve conditions of doing business on the ground across local, state and national levels.

As a result, India's position jumped from a low of 142 in 2014 to 63 in the 2019 Doing Business report, an unparalleled feat. The country was also ranked in the list of "economies with the most notable improvement" for the third year in a row.

Local focus

While hailing India's performance in the global rankings so far, officials say a refocus is now needed. "Over the past seven years, India's performance had been inspiring to many similar economies and the increased incoming FDI is testament to how the change has been visible to foreign investors,” one official said.

“But our domestic ease of doing business exercise has till now been based on World Bank's global index, in order to ensure our rank improved every year. Now, it needs to be changed."

He said the government is now considering how to decouple India's domestic exercise from the goals and parameters set under the global ranking.

"This will allow us to focus on unique domestic challenges in India, from the bureaucratic process, need for digitization of records, lack of awareness, corruption perception to sustainable economic development," he added.

Changing ecosystem

The need for a new set of guidelines has also emerged from the fact that India's domestic business regulations ecosystem has also significantly changed in the last seven years.

Since 2016, the government has also ranked states based on the Business Reforms Action Plan (BRAP). The last edition of the BRAP in 2019 showed Andhra Pradesh, Uttar Pradesh and Telangana lead the rankings. The index is an effort to recognize the states that performed the best in removing red tape and incrementally bettering their business ecosystem.

BRAP 2020, results for which are yet to be released, contains a list of 301 reform action points spread over scores of parameters and at least 18 state government departments. As a result, officials say greater ambition is now required.

"Every year, a list of increasingly sophisticated reforms are planned and most states have shown great consistency in completing them. The government feels that a relook at the exercise may provide a more significant improvement in creating ease of doing business," a DPIIT official said.