As India leapfrogs towards a five trillion-dollar economy by 2024-25, simplifying and maintaining a business-friendly regulatory environment is essential. To ease the constraints and gaps in the regulatory processes involved in doing business, it is necessary to assess the country’s progress vis-à-vis other leading economies on various parameters.
India has made substantial gains in the World Bank’s Doing Business rankings from 142 in 2014 to 63 in 2019. It has progressed on seven out of the 10 parameters. The Goods and Service Tax (GST) and the Insolvency and Bankruptcy Code (IBC) top the list of reforms that have propelled India’srise in rankings. The trajectory of India’s performance over the last decade is shown in Table
|Parameter||India||Peers||New Zealand (Rank 1 in EODB)|
|No. of procedures and days to start a business||10 procedures and 18 days||China takes 4 procedures and 9 days. Other countries like Indonesia, Brazil, Pakistan and Sri Lanka also have a less cumbersome process to start a business than India||1 procedure and half a day|
|Registering Property||9 procedures, at least 49 days, and 7.4-8.1 % of the property value to register||In China – 4 procedures, 9 days, and 4.6 % of the property value to register one’s property||2 procedures and a minimal cost of 0.1 % of the property value.|
|Paying Taxes||250-254 hours per year to pay taxes||China- 138 hours per year||140 hours per year.|
|Enforcing Contracts||1,445 days to resolve an average dispute i.e. approx. 4 years||China – 496 days, Brazil – 801 days, Indonesia- 403 days||216 days|
|The density of Legislation and Statutory Compliance Requirements in Manufacturing|
- A major challenge is the complex architecture of the Indian governance framework including the density of legislation and statutory compliance requirements.
- Manufacturing units have to conform with 6,796 compliance items.
- Hong Kong, which tops the World Bank rankings for ease of obtaining construction permits, it can be seen that Hong Kong takes just over two months to obtain a construction permit, while Delhi takes almost four months. Moreover, it takes 35 days to get water and sewer connection in Delhi — after a significant improvement since 2014.
Achieving Scale Across Business
- Most of the manufacturing units in India have small capacities and consequently low manufacturing efficiencies which are a disadvantage in the global supply chain.
- Countries like Bangladesh, China, Vietnam are able to progress in the value chain by increasing their competitiveness in the international market by improving their delivery time and domestic production capacity.
- Compared to Bangladesh, China, and Vietnam, which have more than 80% of the market value of exports by large enterprises, India has 80% by small enterprises.
Trading Across Borders
- The Trading Across Borders indicator records the time and cost associated with the logistical process of exporting and importing goods.
- Globally, transportation by ports is the most favoured followed by railways and then roads, whereas in India it is the opposite.
- Italy tops the EoDB rankings in Trading Across Borders.
- It must be noted that almost 70% of the delays (both in exports and imports) occur on account of port or border handling processes which essentially pertain to procedural complexities pushing up the cost to trade.
- The survey suggested that while the government has already reduced procedural and documentation requirements considerably through schemes like Authorized Economic Operators, increasing digitalization and seamlessly integrating multiple agencies onto a single digital platform can further reduce these procedural inefficiencies significantly and improve user experience substantially.
Authorised Economic Operator (AEO) is a programme under the aegis of the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate Global Trade. The programme aims to enhance international supply chain security and facilitate the movement of goods. AEO encompasses various players in the international supply chain.
AEO is a voluntary programme, It enables Indian Customs to enhance and streamline cargo security through close cooperation with the principle stakeholders of the international supply chain viz. importers, exporters, logistics providers, custodians or terminal operators, customs brokers and warehouse operators, who benefit from preferential treatment from customs authorities. Benefits include expedited clearance times, fewer examinations, improved security and communication between supply chain partners, and more.
There are three tiers of certification in the new AEO Programme for importers and exporters:
For logistics providers, custodians or terminal operators, customs brokers and warehouse operators there is only one tier:
Who is entitled to AEO Certification
Anyone involved in the international supply chain that undertakes Customs related activity in India can apply for AEO status irrespective of the size of the business. These may include exporters, importers, logistic providers (e.g. carriers, airlines, freight forwarders, etc.), custodians or terminal operators, customs house agents and warehouse owners. Others who may qualify include port operators, authorized couriers, stevedores.
India’s Performance in logistics in specific segments
The survey has analysed various case studies and industrial survey and arrived at the conclusion that-
- There exist inordinate delays in loading and customs processes in Indian sea-ports.
- The processes for imports, ironically, are better than those for exports.
- The large variance in process time means that exporters have to pad up the time spent waiting which adds to the clogging of port space.
In contrast, the processes in Indian airports are vastly superior to those at seaports for both imports and exports
- AEO did significantly improve the process but it is reasonably smooth even for non-AEO operators importing/ exporting electronics
- Indian processes can beat international standards.
- The processes of Indian airports should be adapted and replicated in sea-ports
The streamlining of the logistics process at sea-ports requires close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities. The simplification of the Ease of Doing Business landscape of individual sectors such as tourism or manufacturing, however, requires a more targeted approach that maps out the regulatory and process bottlenecks for each segment. Once the process map has been done, the correction can be done at the appropriate level of government – central, state or municipal.