It may have become easier for Indian businesses to start a business, but their access to credit and ease of paying taxes has worsened, according to the World Bank’s Doing Business Report 2016. India now ranks 130 out of 189 countries in the ease of doing business, moving up four places from last year’s adjusted ranking of 134.
The rankings for both the years are part of a revised methodology adopted by the bank. India improved its position on three counts—starting a business, getting construction permits and accessing electricity—in the latest edition of the Ease of Doing Business Index, but saw its performance worsen with regard to two parameters—accessing credit and paying taxes.
In the areas that India’s performance has improved, the biggest improvement was under the head of ease of ‘access to electricity’, where it moved up 29 spots to 70.
Here, though, the assessment in the study that focused on the challenges faced by a business house in obtaining a permanent electricity connection for a newly constructed warehouse, was limited to the city of Mumbai, which has the best electricity distribution utilities operting in the country.
Another cause of concern was that the ‘getting credit’ ranking has slipped from 36 to 42, implying that it has become much more difficult to get credit in India despite the government’s efforts at financial inclusion and pushing ease of credit delivery.
It also slipped one spot in the criteria of ease of paying taxes.
India moved up nine spots in the criteria of starting a business to 155 in 2016 from 164 last year and its ranking for dealing with construction permits also moved up one spot to 183. In other segments such as protecting minority investors, registering property, trading across borders, enforcing contracts and resolving insolvency, India’s rankings remained the same as last year.
However, in the area of protecting minority interests of shareholders, India is ranked at eight, its best ranking across all parameters.
The NDA government has announced its plans to resolve insolvency issues and enforcing contracts through legislations such as the bankruptcy law and public contracts dispute resolution bill— areas where it is languishing in the overall Ease of Doing Business rankings.
India is ranked 178 in the parameter of enforcing contracts and 136 on the parameter of resolving insolvency.
“In the past year, India eliminated the paid-in minimum capital requirement and streamlined the process for starting a business. More reforms are ongoing—in starting a business and other areas measured by Doing Business—though the full effects are yet to be felt,” the World Bank has said.