The World Bank’s ease of doing business report showed that eight reforms were key in helping businesses in 2016/17. India is also among the 10 economies to have improved the most, alongside El Salvador, Malawi, Nigeria and Thailand.
Doing business in India became much easier over the past one year because of a raft of policy reforms, an annual World Bank index showed on Tuesday, in what is possibly a shot in the arm for Prime Minister Narendra Modi’s efforts to win big-ticket investments.
For the first time, India jumped 30 places to break into the top 100 in the ease of doing business rankings for the year to June 2017. The 190-country index is an influential barometer of competitiveness among countries that likely also helps businesses make investment decisions.
India’s impressive performance was largely due to reforms in taxation, insolvency laws and access to credit, part of measures Prime Minister Modi’s government has pushed to boost investment and jobs that would help absorb a million people who join the workforce every month.
“India’s performance is not based on efforts of just one year but consistent efforts made over the last three years to continuously improve the regulatory environment of doing business,” Annette Dixon, vice president South Asia, told a press conference.
“It is the result of a number of reforms that the government has undertaken that India is becoming a preferred destination to do business.”
India saw improvements in six of 10 indicators, including on winning construction permits, enforcing contracts, paying taxes and resolving insolvency. It, however, slipped when it came to starting a business, getting an electricity connection, cross-border trade and registering property.
Underlining how reforms had helped India improve its overall ranking, the World Bank said the establishment of debt recovery tribunals reduced non-performing loans by 28% and lowered interest rates on larger loans, suggesting that faster processing of debt recovery cases cut the cost of credit.
India was also among the 10 economies to have improved the most, alongside El Salvador, Malawi, Nigeria and Thailand.
The data analytics and processing coupled with intelligence inputs would inter-alia provide CBEC national and sub-national perspective for policy formulation
The government has set up a new wing under the indirect taxes body to provide intelligence inputs and carry out big data analytics for taxmen for better policy formulation and nabbing evaders.
The Directorate General of Analytics and Risk Management (DGARM) will be under the Central Board of Excise and Customs (CBEC), mainly to use internal and external sources for detailed data mining to generate actionable inputs, the revenue department said in an office memorandum. The DGARM, set up on July 1, coinciding with the roll-out of the GST regime, has four verticals headed by an official of rank of additional director general or principal ADG. It will function as an apex body of CBEC for data analytics and risk management, and report to the CBEC chairman.
Incidentally, the CBEC is to be renamed as the Central Board of Indirect Taxes and Customs (CBIC) after excise duty along with service tax and a dozen other central and state levies were subsumed into GST.
“The data analytics and processing coupled with intelligence inputs would inter-alia provide CBEC national and sub-national perspective for policy formulation. The field formations of CBEC are expected to gainfully and effectively utilise the data and other inputs shared by the DGARM,” the memorandum said.
As part of the DGARM, a National Targeting Centre has been set up, which is responsible for application of a nationally coordinated approach to risk analysis and targeting of risky goods and passengers crossing the borders of the country. “It shall provide 24×7 operational risk interdiction supports to field formations of the CBIC,” it said.
The centre in question will institutionalise coordination with other government departments and other stakeholders for sharing databases, information, intelligence and reports to build risk profile of entities. A Centre for Business Intelligence and Analytics has also been set up and will be responsible for identification of information requirements of the CBEC. It will utilise data feeds from internal sources.
It shall be responsible for providing analytical inputs to support identification, targeting and risk management functions of the National Targeting Centre, the Risk Management Centre for Goods and Services Tax, and the Risk Management Centre for Customs.
The third vertical of the DGARM is the Risk Management Centre for Goods and Services Tax, which will institutionalise mechanism to collect necessary inputs, adopt coordinated approach and share the outcome for risk-based identification for the purpose of scrutiny, audit and enforcement functions.
Besides, the Risk Management Centre for Customs will be responsible for assessment and targeting of risky cargo crossing the borders through sea, air and land. The DGARM will do detailed data mining and analysis to generate outputs for focused and targeted action by field formations and investigation wings of the CBEC.
India continues to rank low at 130th position in terms of ease of doing business, with the country seeing little or no improvement in dealing with construction permits, getting credit and other parameters.
In the World Bank’s latest ‘Doing Business’ report, India’s place remained unchanged from last year’s original ranking of 130 among the 190 economies that were assessed on various parameters. However, the last year’s ranking has been now revised to 131 from which the country has improved its place by one spot.
The government has been making efforts to further improve the ease of doing business and aims to bring the country in the top 50.
Expressing disappointment over no change in India’s ranking in the World Bank’s index on ease of doing business, Indian government regretted that the report did not take into consideration 12 key reforms undertaken by the government.
When it comes to ‘distance to frontier’ — a measurement of the gap between an economy’s performance and the best practice score of 100 — India’s score has improved to 55.27 this year from 53.93 last year.
India is the only country for which the report has a box dedicated to its ongoing economic reforms.
The list of countries in the Doing Business 2017 is topped by New Zealand while Singapore is ranked second. It is followed by Denmark, Hong Kong, South Korea, Norway, the UK, the US, Sweden and former Yugoslav Republic of Macedonia.
Neighbouring Pakistan is ranked 144th in the list.
On the basis of reforms undertaken, the top 10 improvers are Brunei Darussalam, Kazakhstan, Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, United Arab Emirates and Bahrain.
A record 137 economies around the world have adopted key reforms that make it easier to start and operate small and medium-sized businesses, the report said.
Developing countries carried out more than 75 per cent of the 283 reforms in the past year, with Sub-Saharan Africa accounting for over one-quarter of all reforms, it added.
“What we have seen is a remarkable effort on the part of the government to implement business reforms. It looks like we are going to have to wait for another year or so. But the direction of change is fundamentally a very significant one,” Global Indicators Group Director Augusto Lopez-Claros told PTI in an interview.
The rankings are based on ten parameters — 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.
India has improved its ranking with respect to various areas. In terms of getting electricity, the country’s position has jumped to 26th spot from 51st place last year.
When it comes to trading across borders, the ranking has moved up one place to 143, and in enforcing contracts the rise is of six spots to 172nd position.
However, with respect to starting a business, the ranking has slipped four places to 155th spot and in the case of dealing with construction permits by one rank to 185th.
As per the report, India’s ranking in terms of protecting minority investors dropped to 13th place from 10th position last year.
With regard to getting credit, the ranking has fallen by two places to 44.
Explaining as to why India’s reform efforts is not being reflected in the ease of doing business report, Lopez-Claros said it very often takes some time for the reforms implemented by governments about the regulatory environment to be felt on the ground by the business community.
Rita Ramalho, Manager of the Doing Business project said that there were in fact improvements this year.
“There are four areas of improvement this year in India getting electricity, trading across border, enforcing contracts and paying taxes,” Ramalho told PTI.
India’s ranking is based on the study of the system in the two cities of Mumbai and New Delhi.
“The reason why there is no real movement in the ranking is more to do with the fact that other countries are also moving. In absolute terms India, does improve significantly.
There aren’t many countries that improved more than India in terms of absolute number,” Ramalho said.
The ‘Doing Business’ project provides objective measures of business regulations for local firms in economies and selected cities at the sub-national level.
The World Bank is emphasising that countries pay attention to what it calls “distance to frontier” which is an absolute metric, Lopez-Claros said.
“There has been actually substantial increase in the last 12 months in India by couple of percentage points, which is quite large,” he noted.
A man is silhouetted against the logo of the World Bank at the main venue for the International Monetary Fund (IMF) and World Bank annual meeting in Tokyo October 10, 2012. REUTERS/Kim Kyung-Hoon
As the World Bank looks set to release its annual ranking of countries in the ease of doing business later this week, India expects to improve its position from last year’s 130 out of 189 economies. The optimism stems from the fact that, for a second straight year, the country expects its ranking in “getting electricity’’ to improve substantially on the back of some “remarkable work” done by states, a senior government official told FE.
Last year, India was placed at 70 of the 189 countries in “getting electricity”, compared with 99 in the previous year. This had helped the country improve its ranking in the overall ease of doing business by 4 notches.
The government also believes that its “targeted intervention” to improve performance in difficult parameters — including dealing with construction permits and enforcing contracts — where the country has been faring badly for years now will start to pay, the official said.
So while it will take some time to correct the course in certain legacy issues, especially in enforcing contracts, the DIPP believes the much-improved performance of states will be reflected in the country’s ranking for the years to come.
For instance, while only two states (Gujarat and Andhra Pradesh) had scored over 70% in a 98-point action plan for the ease of doing business — jointly decided by them and the Centre — last year, as many as 16 states have scored over 70% so far this year, that too on a 340-point action plan, showed the latest data by the Department of Industrial Policy and Promotion (DIPP). Importantly, 10 states have scored over 90% so far this year (Andhra Pradesh and Telangana top the charts in 2016, each scoring over 99%).
The latest ranking of the World Bank takes into account reforms done up to the end of May, except in case of taxation.
The performance in access to electricity has been impressive, the official said. For instance, in Mumbai, the time required for getting a new electricity connection has been reduced to an average of around 15 days from 67 days earlier. The number of procedures involved has been cut down to just 3 from 7. Similarly, in Delhi, people can get connections in just 15 days now from as many as 140 days a few years earlier. The number of document required has been reduced to just 2 from 7 earlier. Access to electricity is crucial as it also has bearing on performance in some other aspects of the ease of doing business.
In “dealing with construction permits”, where the country was ranked at 183 of the 189 countries, the performance has improved. For instance, in Delhi and Mumbai, common online application form has been adopted for seeking construction permits. People don’t have to get no-objection certificates from anyone, as municipal corporations will get these certificates for them online. Earlier, some 18 no-objection certificates from different departments were required to be obtained by individuals for getting construction permits.
Also, in a metro like Delhi which has traditionally fared badly in handling construction permits, the documents required for this purpose has now been cut to just 14 from 39 earlier. Nine departments involved in the process of the sanction of buildings have been integrated online. The drawing of the construction plan is “auto-checked” by a software and no site inspection is necessary. Reforms on this parameter have been even quicker in other parts of the country.
On enforcing contracts in which India was placed at 178, the government has decided to set up commercial courts in a big way after the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill was signed into a law on January 1.
Although the exact data on the formation of such courts are yet to be compiled precisely, roughly a dozen such courts are learnt to have been set up, especially in Delhi, Mumbai, Gujarat and Himachal Pradesh, to settle high-value business disputes.
All pending suits and applications on commercial disputes involving a claim of Rs 1 crore or more in high courts and civil courts will be transferred to the relevant commercial division or courts. The decision to set up such courts is in sync with the Narendra Modi government’s aim of making India a global arbitration hub. The government plans to introduce e-summon system and efforts are on to expedite the process of getting a verdict, said the official.
To boost cross-border trade, the number of documents required for trade has been restricted to just 2-3 from as many as a dozen in certain cases earlier. Importantly, the finance ministry is learnt to have sanctioned Rs 2,500 crore for the upgrade of the IT and some other systems of the Customs departments.
An eBay sign is seen at an office building in San Jose, California May 28, 2014.
Online retailers would be banned from stopping a customer in one EU country buying from a website based in another, under a proposal issued on Wednesday to make it easier for consumers to shop across the bloc.
The European Commission said its law would stop “geoblocking” where companies limit access to their websites based on user location, often forcing customers to use versions based in their own country, sometimes with higher prices.
“In the online world, all too often consumers are blocked from accessing offers in other countries,” the Commission said in a statement.
“Such discrimination has no place in the single market.”
The law would affect companies such as Amazon, eBay and Zalando as well as to sales of services provided in a specific location, for example car rental, accommodation and concert tickets.
It would not initially apply to copyright-protected items such as e-books, music and games, although those might be included soon, the Commission said. So for the time being a German citizen would still be unable to buy a Spotify subscription in, for example, Estonia, where it is much cheaper.
The music industry welcomed the exemption, saying that to include such services in the geoblocking proposal would be “a serious blow for cultural diversity.”
Under Wednesday’s proposal, which requires the approval of the European Parliament and national governments to become law, retailers would not be allowed to block access to websites based on a user’s location or to re-route customers to a website version based in their own country without their consent.
Amazon already makes its websites accessible to customers anywhere in Europe, and says 98 percent of its own stock is available to shoppers from any European country.
While e-commerce websites will not be allowed to prevent customers in one EU country buying products in another, they will not be forced to deliver cross-border.
Therefore, an Italian buying a TV from a German website would either have to arrange their own delivery or collect it at the trader’s premises.
The Commission hopes the new rules will increase the proportion of consumers who buy online from another country, currently only 15 percent.
“The European Commission is doing the right thing by helping solve practical problems faced by online businesses, particularly small and medium sized businesses,” said eBay’s’ Paul Todd, Senior Vice President of EMEA (Europe, Middle East and Africa).
A business group said the proposal failed to address the reasons companies use geoblocking, such as differing VAT rates and consumer protection rules.
“This is like putting a sticking plaster on a broken leg,” said John Higgins, director general of DIGITALEUROPE, which represents companies such as Sony, Google and Dropbox.
In a separate proposal, the EU executive sought to increase the transparency of prices for cross-border parcel delivery and to give national authorities the power to assess whether they are affordable.
Governed by rules and conventions of banking secrecy, banks in Switzerland and tax havens divulge information only after account holders give their consent.
Even NRIs with offshore bank accounts cannot keep the taxman at bay by obtaining quick relief from the court of law. In order to prove their innocence, such persons will have to instruct the overseas banks to share information on the accounts with the Indian tax office.
And, only after the details released by the bank show that the money lying in the account does not belong to the person who has been pulled up (for hiding offshore assets), can he escape the glare of tax officials.
The Bombay High Court recently dismissed the writ petition filed by an NRI — an alleged beneficiary of a trust linked to an account with HSBC Geneva — after she refused to sign the “consent waiver” form to let HSBC share the information on the account. Governed by rules and conventions of banking secrecy, banks in Switzerland and tax havens divulge information only after account holders gives their consent.
The court, in its order dated April 5, said, “In the normal course of human conduct if a person has nothing to hide and serious allegations/questions are being raised about the funds, a person would make available the documents which would put to rest all questions which seem to arise in the mind of the authorities.”
Since the court did not allow the withdrawal of petition, the order is likely to be used by the tax office which is trying to fish out bank account and transaction details from those it suspects to have accounts with HSBC Geneva.
According to the base note that the French government had shared with New Delhi, the petitioner Soignee R Kothari, along with six other individuals and two trusts, are beneficiaries of an account held by one White Cedar Investments with HSBC Geneva; the seven individuals in turn are beneficial owners of the two trusts.
As on 26 March 2006, the account had a balance of more than $44 million. The department had served Ms Kothari a notice to reopen assessment for the assessment year 2006-07.
She has later agreed (in a rejoinder before the court) to sign the consent waiver form with a modification — as ‘alleged beneficiary’ rather than ‘holder or beneficiary’ of the account in HSBC Geneva.
“With this, the Bombay High Court has precluded any alleged holder of overseas bank account from seeking alternative remedy by way of a writ. However, their right to contest any addition of income by the tax authorities would still survive. Thus, while NRIs can prove that they are outside jurisdiction of Indian tax authorities, they cannot wriggle out of investigation by virtue of being NRIs,” said senior chartered accountant Dilip Lakhani. The other six alleged beneficiaries of the trust are Arun Ramniklal Mehta, Russell Mehta, Viraj Russell Mehta, Rihen Harshad Mehta, Naina Harshad Mehta and Priti Harshad Mehta.
The court said that this bank statement if obtained from HSBC Geneva “would reveal and/or possibly give clues as to the source of amounts deposited in the Account No. 5091404580.” “If a person has nothing to hide, we believe the person would have co-operated in obtaining bank statements,” said
The possibility of their investing, either directly in projects or through the National Investment and Infrastructure Fund (NIIF) that we have created, were both discussed,” he told reporters at the Indian High Commission in London.
Amid fears of the global economy edging close to recession, India and UK have agreed to open up trade and markets to support growth, carry out structural reforms and address issues related to cross-border tax evasion.
After talks between India’s Finance Minister Arun Jaitley and UK Chancellor of the Exchequer George Osborne, the two nation’s agreed to boost economic ties particularly in areas of infrastructure and financial services and renewed pledge for autonomical exchange of tax information from 2017.
“From the Indian point of view, we were extremely interested in having the British investors look at infrastructure investments in India for which various possibilities were discussed,” Jaitley said after the talks.
India, he said, is “extremely keen that large British companies, particularly involved in infrastructure financing, start investing in Indian infrastructure”.
The two nations will work together for developing an India-UK partnership fund under the umbrella of National Investment and Infrastructure Fund (NIIF) recently created in India.
“This fund will seek to increase flows of private sector capital and expertise alongside multilateral support into Indian infrastructure,” a joint statement issued after talks said.
The world’s fifth largest economy will work on development of smart cities in India. New Delhi is also looking at London for issuance of rupee-denominated bonds to get UK investors to fund its infrastructure projects.
“The possibility of their investing, either directly in projects or through the National Investment and Infrastructure Fund (NIIF) that we have created, were both discussed,” Jaitely told reporters at the Indian High Commission here.
With the IMF warning of global economy being close to recession with 3.4 per cent growth this year, the two sides said they “remain concerned that global growth is falling short of expectations and that the risks to the global outlook have increased”.
“In this regard we stand ready to take the necessary steps to open up trade and markets to support growth and jobs, and agree on the importance of structural reforms and pursuing credible fiscal policies,” the joint statement said.
The joint statement talked about advancement of cooperation in a range of sectors including infrastructure financing, addressing issues of cross-border tax evasion/ avoidance besides opening up of the Indian legal sector to foreign lawyers.
“The UK and India share a common commitment to address cross-border tax evasion and avoidance. Both sides have committed to the Common Reporting Standards (CRS) on Automatic Exchange of Tax Information and will begin exchange in 2017,” the statement said.
“We call on other countries to meet the commitments they have made and to implement the new standard on time,” it said.
During the talks, which included senior representatives from Finance Ministries, Central Banks and key regulators of both countries, the two leaders discussed ways to strengthen the Indo-UK existing economic partnership in order to further boost trade and investment, and to build on the success of Prime Minister, Narendra Modi’s recent summit with his British counterpart David Cameron in the UK.
“Given the fact that even in a somewhat difficult global scenario, India is managing a reasonable growth rate, this is one of the better options that investors have and that kind of a sentiment gets really echoed in the meetings with the investors that we had. Of course, the investors are also keenly watching which way our reform process in India goes,” Jaitley said.
The two nations agreed to work together on building commercial and regualtor-to-regulator links that can underpin further fintech growth in both countries.
“The UK and India agreed to renew the existing mandate of the India-UK Financial Partnership, and building on the re-establishment of the CEO Forum,” the statement said, adding that potential areas of interest for the India-UK Financial Partnership could be reinsurance, international use of the rupee, role of financial technology, financial inclusion, investor protection and green finance.
“The global economy is facing serious challenges and therefore the estimates of global growth also have been repeatedly lowered. Compared to how various countries across the world have been doing, India’s growth rate despite these challenges is probably the highest in the world among major economies,” Jaitley said, in reference to his meetings with investors at Goldman Sachs and London Stock Exchange.
As a follow up on Prime Minister Modi’s announcement during his UK visit last November on the listing of Rupee bonds in London, the minister said, “the UK is very keen for these to be listed in London and broadly the economic and financial dialogue was carried further”.
During the dialogue, the two sides recognised that as the leading financial centre in the world and in the view of successful issuance of Masala bonds issued by the International Finance Cooperation last year, London will be an attractive location for issuance of rupee-denominated bonds.
“The bonds, which were first announced during the visit of Prime Minister Modi to the UK in November, illustrate the crucial role that the UK’s capital markets can play in an enhanced economic relations relationship with India, with UK investors providing financing for the transformation of India’s infrastructure and continued rapid economic growth,” the statement said.
India and the UK also agreed that the development of deeper markets in rupee-linked products, and the increasingly sophisticated relationship between the Indian and UK financial sectors, are important underlying factors in fostering an enduring economic and financial partnership.
Both sides agreed to continue working closely on the development of smart cities in India.
“We will continue to build on and further embed the existing Technical Assistance Partnerships that were announced during Prime Minister Modi’s recent visit to the UK, and to continue working together on research collaboration and other measures to support India’s 100 Smart Cities programme,” the statement said.
While noting the strength of the economic outlook for both countries, the two sides expressed concern that global growth is falling short of expectations and that the risks to the global outlook have increased.
“In this regard we stand ready to take the necessary steps to open up trade and markets to support growth and jobs, and agree on the importance of structural reforms and pursuing credible fiscal policies in order to raise living standards,” it said.
India and the UK also agreed to work together with the aim of developing an Indo-UK partnership fund under the umbrella of the NIIF. The fund will seek to increase flows of private sector capital and expertise alongside multilateral support into Indian infrastructure.
The working group to be established will report back within the course of 2016 on a proposed fund strategy and delivery approach, the statement said.
“As part of this, India and the UK also both recognise the importance of identifying the sector or sectors where there is greatest potential for developing sustainable project pipelines, and of developing a supportive institutional environment for investment and delivery,” it said.
