Ease of Doing Business
- April 13, 2016
- by
- Prince Kumar
EASE OF DOING BUSINESS IN INDIA
Going beyond Efficiency, presents quantitative indicators on business regulations and the protection of property rights that can be compared across 189 economies—from Afghanistan to Zimbabwe—and over time. These regulations affects 11 areas of the life of a business. Doing business measures all these regulations. Ten of these areas are included in this year’s ranking on the ease of doing business: 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. Besides, these 10 areas one more area labour market regulation which is also measured, and which is not included in this year’s ranking.
Starting a Business Methodology
The ranking of economies on the ease of starting a business is determined by sorting their distance to frontier scores for starting a business. These scores are the simple average of the distance to frontier scores for each of the component indicators (As shown in figure 2). The distance to frontier measure illustrates the distance of an economy to the “frontier” which is derived from the most efficient practice or highest score achieved on each indicator.
A detailed list of procedures is developed, along with the time and cost to comply with each procedure under normal circumstances and the paid-in minimum capital requirement, after a study of laws, regulations and publicly available information on business entry. Subsequently, local incorporation lawyers, notaries and government officials complete and verify the data.
Business Credit
The business needs money to start. So, in order to facilitate poor people with money , BUSINESS CREDIT OPTION IS AVAILABLE. Many banks are providing business loans at an attractive rate. Further, RBI has continued to take necessary steps for strengthening the credit environment in India. Thanks to the creation and expansion of a national credit bureau offering credit scores and coverage through which a small business in India is likely to get credit and hire more workers." Prime Minister of India, in September, had said that India's ranking could be improved to the 50th position by making government regulations easier. India is ranked 36th with respect to 'getting credit' category as compared to 34th place in last year.
Protecting minority investors
"India strengthened minority investor protections by requiring greater disclosure of conflicts of interest by Board members. India is ahead of the US, Japan, France and Germany when it comes to protecting minority investors and is ranked as 7th best country in protecting minority investors. In Companies Act, 2013 many provisions regarding the protection of interest of the minority shareholders like class action suit has been included.
Trading cross border
How much time, how many documents and what cost to export and import by sea transport?
Doing Business measures the time and cost associated with exporting and importing excluding tariffs by sea transport. All documents needed by the trader to export or import the goods across the border are recorded. Amongst Trading across Borders’ India ranks on 126.
After issue of DGFT’s Notification only three documents each would be mandatory for export and import as two documents (Packing List and Commercial Invoice) required by Customs have been merged into one document, whereas one document required by RBI (Foreign Exchange Control Forms – SDF for exports and A-1 for imports) and one document required by Ministry of Shipping (Terminal Handling Receipt) earlier, have now been dispensed with. ‘Cargo Release Order’ is not a mandatory document required by any regulatory agency, but is a commercial document issued by the Shipping line to the concerned importer. As regards, ‘Technical Standard Certificate’/ ‘Certified Engineer’s Report’, ‘Product manual’ and ‘Inspection report’, these documents are required in specific cases/products/tariff lines only and are not mandatory for all products.
Formation 0f Company becomes easy
Now, a company can be incorporate just by filing only one form i.e e-form INC 29, there is no need to file separate form for each procedure.INC-29 gives a fast track procedure for registering any company in India. To simplify and fast track the procedure for company registration in India, the Ministry of Corporate Affairs (MCA) has introduced Form INC-29 – Integrated Incorporation Form. Form INC-29 Company Registration has merged the process of getting Director Identification Number (DIN), Name Approval and Incorporation application into one single process – thereby significantly reducing the time taken to start a company in India. The INC-29 form can be accessed through http://www.mca.gov.in/MinistryV2/Download_eForm_choose.html.
Earlier 8 forms had to be filled for getting the company registered. As the entire process of incorporation is in a single form, correct filing could mean an approval in 48 hours, that is what government has claimed. If the form is rejected then you can apply for refund through Refund Form. Also, one can apply for PAN- Permanent Account Number and Tax Deduction Account Number-TAN.
INC-29 will provide following services through a single e-form:
Ø Allotment of DIN-Director Identification Number
Ø Name of a company
Ø Incorporation of a company
Corporate Tax
Total tax rate estimated at 61.7% in India, compared to 41.3% for OECD countries, India has been placed 156th. In this regard, Corporate tax will be reduced from 30% to 25% in a phased manner.
Number of steps of procedure to apply for electricity connections has been reduced by Maharashtra and Delhi government.
Conclusion
Significant improvements have been made in regulatory environment through deregulation, delicensing and simplification of procedures. Government is also in process to replace around 35 labour laws with 3 new labour laws. Continuous efforts is being made to introduce the online system based work for the approvals to speed up the approval process and have transparency in the working of the government departments.