Ease of Doing Business : Achievements and Challenges – UPSC GS3

Background: India has moved up from 142 among 189 nations in 2014 to 63 in 2019 in the World Bank’s ranking.
Steps taken so far to improve ease of doing business in India:
  • Cutting down outdated procedures
  • Infusing transparency
  • Minimizing citizen-state interface
  • Reducing bureaucratic discretion at the sub-national level up to local bodies.
  • Ranking of states based on their performance
  • Nudging the states : For instance, extra borrowing by states was linked to implementing ease of doing business reforms at the state level.
  • Eliminating the need for renewing registrations and licences by businesses under various laws
  • Setting up a computerized central and random inspection system to ensure the same inspector is not assigned to any unit in subsequent years.
  • Businesses were to be given prior notice before inspections, and the reports were to be uploaded within 48 hours.
Existing challenges to ease of doing business in India:
  • Need for Improvement in the enforcement of a contract: Currently, the judicial procedure in India is prone to undue delays. Sometimes it takes 15-20 years for civil disputes to be adjudicated. As a result, India’s global rank on enforcement of contracts is a low 163.
  • Efforts to make land acquisition easier for setting up new factories by legislative amendments have not been successful.
  • High compliance cost.
Steps taken:
  • Steps were taken to improve the quality and efficiency of commercial courts: Several rounds of meetings have been held with law firms, corporate bodies, chambers of commerce, and industry to work in an integrated manner along with the judicial fraternity.
  • Steps taken to simplify dispute resolution in India:
    • After the 2015 legislation, India had set up dedicated commercial courts in Delhi, Mumbai, Kolkata and Bengaluru with dedicated infrastructure for quick disposal of cases. It will help in disposing of cases of in a swift and time-bound manner.
    • NITI Aayog is currently advocating online dispute resolution, to improve ease of dispute resolution. It helps in handling disputes outside courts, particularly of small and medium-value cases, using digital tech and techniques of alternative resolution such as negotiation, mediation and arbitration.
  • Steps taken to reduce compliance cost: NITI Aayog has reached out to states to weed out irrelevant compliance requirements. The department for the promotion of industry and internal trade (DPIIT) is guiding the efforts of central ministries and states to simplify the regulatory architecture and ranks states on the basis of its business reform action plan.
Way Forward:
  • Judicial reforms are needed to simplify dispute resolution.
  • Implementing labour codes passed by Parliament would significantly improve the ease of doing business
  • Cost of compliance, as well as logistics, power, and credit, needs to be addressed.
  • In this regard, suggestions to policymakers include simplifying GST, revision in GST exemption limit for MSMEs and professionals, and even faster bankruptcy resolution.
  • Individual states should take efforts to make changes in the local laws. Otherwise, the efforts at the national level in easing businesses in India, will not be felt
Scroll to Top