‘Ease of doing business’ refers to the regulatory environment in a country to set up and operate a business. Every year, the World Bank compares the business environment in 190 countries in its Ease of Doing Business Report. In its report released yesterday, India’s rank improved to 100 out of 190 countries in 2017, from its rank of 130 in the previous year.[1],[2] In this context, we explain the parameters on which each country is ranked, what has led to India’s improvement in rankings, and some recommendations made by committees to further improve the business environment in the country.
What parameters is a country ranked on?
The ease of doing business rankings are based on a country’s performance on 10 parameters such as enforcing contracts and starting a business. In India, these rankings are based on the business environment in Mumbai and Delhi. A lower rank indicates better performance on that parameter, whereas a higher rank indicates worse performance on the indicator. India’s ranking improved in six out of the 10 parameters over the previous year, while it remained the same or fell in the remaining four (see Table 1).
Note that these parameters are regulated by different agencies across the three tiers of government (i.e. central, state and municipal). For example, for starting a business, registration and other clearances are granted by central ministries such as Finance and Corporate Affairs. Electricity and water connections for a business are granted by the state electricity and water boards. The municipal corporations grant building permits and various other no objection certificates to businesses.
What has led to an improvement in India’s ease of doing business rankings?
According to the 2017 report, India introduced changes in some of these parameters, which helped in improving its ranking.1 Some of these changes include:
What are some of the other recommendations to improve the business environment in India?
Over the last few years various committees, such as an Expert Committee constituted by the Department of Industrial Policy and Promotion and the Standing Committee of Commerce, have studied the the regulatory requirements for starting a business in India and the made recommendations on the ease of doing business.[7],[8],[9] Some of the issues and recommendations made by these committees are discussed below.
Starting a business: The Standing Committee observed that regulations and procedures for starting a business are time-consuming.8 The Committee observed that as a consequence, a large number of start-ups are moving out of India and setting base in countries like Singapore where such procedures are easier. It emphasised on the need to streamline regulations to give businesses in India a boost. Note that the government announced the ‘Start-up India Action Plan in January 2016.[10] The 19-point plan identified steps to simplify the process for registering and operating start-ups. It also proposed to grant tax exemptions to these businesses.
The Committee had suggested that the procedures and time period for registration of companies should be reduced. In addition, a unique business ID should be created to integrate all information related to a debtor. This ID should be used as sole reference for the business.
Acquiring land, registering property: Under the current legal framework there are delays in acquiring land and getting necessary permissions to use it. These delays are on account of multiple reasons including the availability of suitable land and disputes related to land titles. It has been noted that land titles in India are unclear due to various reasons including legacy of the zamindari system, gaps in the legal framework and poor administration of land records.[11]
The Standing Committee observed that the process of updating and digitising land records has been going on for three decades. It recommended that this process should be completed at the earliest. The digitised records would assist in removing ambiguity in land titles and help in its smooth transfer. It also suggested that land ownership may be ascertained by integrating space technology and identification documents such as Aadhaar. Note that as of September 2017, land records had been linked with Aadhaar in 4% of the villages across the country.[11]
Several states have taken steps to improve regulations related to land and transfer of property.8 These steps include integration of land records and land registration by Andhra Pradesh and Gujarat, and the passage of a law to certify land titles in urban areas by Rajasthan. The Committee also recommended creating a single window for registration of property, to reduce delays.8
Construction permits: In India, obtaining construction permits involves multiple procedures and is time consuming. The Standing Committee had observed that it took 33 procedures (such as getting no objection certificates from individual departments) over 192 days to obtain a construction permit in India.8 On the other hand, obtaining a similar permit in Singapore involved 10 procedures and took 26 days.
Taxation: The Standing Committee had noted that the tax administration in India was complex, and arbitration proceedings were time-consuming. It observed that the controversies on the Minimum Alternate Tax on capital gains and the tax disputes with companies like Vodafone and Shell had harmed India’s image on taxation matters. Such policy uncertainty and tax disputes have made foreign companies hesitant to do business in India.8
The Committee observed that for ‘Make in India’ to succeed, there is a need for a fair, judicious and stable tax administration in the country. Further, it suggested that to reduce harassment of tax payers, an electronic tax administration system should be created.8 Such a system would reduce human interface during dispute resolution. Note that the Goods and Services Tax (GST) was introduced across the country from July 1, 2017. The GST framework allows for electronic filling of tax returns, among other measures.[12]
Enforcing contracts: Enforcing contracts requires the involvement of the judicial system. The time taken to enforce contracts in India is long. For instance, the Standing Committee noted that it took close to four years in India for enforcing contracts. On the other hand, it took less than six months for contract enforcement in Singapore. This may be due to various reasons including complex litigation procedures, confusion related to jurisdiction of courts and high existing pendency of cases.8
The Standing Committee recommended that an alternative dispute resolution mechanism and fast track courts should be set up to expedite disposal of contract enforcement cases. It suggested that efforts should be made to limit adjournments to exceptional circumstances only. It also recommended that certified practitioners should be created, to assist dispute resolution.8
[1] ‘Doing Business 2018’, World Bank, http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB2018-Full-Report.pdf.
[2] ‘Doing Business 2017’, World Bank, http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB17-Full-Report.pdf.
[3] Insolvency and Bankruptcy Code, 2016, http://www.prsindia.org/billtrack/the-insolvency-and-bankruptcy-bill-2015-4100/.
[4] G.S.R. 436 (E), G.S.R. 437 (E) and G.S.R. 438 (E), Gazette of India, Ministry of Labour and Employment, May 4, 2017, http://labour.gov.in/sites/default/files/Notifications%20for%20amendment%20under%20EPF%2C%20EPS%20and%20EDLI%20Schemes%20for%20e-Payment_0.pdf.
[5] Finance Bill, 2017, http://www.prsindia.org/billtrack/the-finance-bill-2017-4681/; Memorandum explaining the provisions of the Finance Bill, 2017, http://unionbudget.nic.in/ub2017-18/memo/memo.pdf.
[6] National Judicial Data Grid, http://njdg.ecourts.gov.in/njdg_public/index.php.
[7] Report of the Expert Committee on Prior Permissions and Regulatory Mechanism, Department of Industrial Policy Promotion, February 27, 2016.
[8] ‘Ease of Doing Business’, 122nd Report of the Department Related Standing Committee on Commerce, December 21, 2015, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Commerce/122.pdf.
[9] Ease of Doing Business: An Enterprise of Survey of Indian States, NITI Aayog, August 28, 2017, http://niti.gov.in/writereaddata/files/document_publication/EoDB_Single.pdf.
[10] Start Up India Action Plan, January 2016, http://www.startupindia.gov.in/pdffile.php?title=Startup%20India%20Action%20Plan&type=Action&q=Action%20Plan.pdf&content_type=Action&submenupoint=action.
[11] Land Records and Titles in India, September 2017, http://www.prsindia.org/parliamenttrack/analytical-reports/land-records-and-titles-in-india-4941/.
[12] The Central Goods and Services Tax Act, 2017, http://www.prsindia.org/billtrack/the-central-goods-and-services-tax-bill-2017-4697/.
Yesterday, the BJP announced its candidate for the upcoming election of the President, which is scheduled to be held on July 17. In light of this, we take a look at the manner in which the election to the office of the President is conducted, given his role and relevance in the Constitutional framework.
In his report to the Constituent Assembly, Jawaharlal Nehru had explained, “we did not want to make the President a mere figurehead like the French President. We did not give him any real power but we have made his position one of great authority and dignity.” His comment sums up the role of the President as intended by our Constitution framers. The Constituent Assembly was clear to emphasise that real executive power would be exercised by the government elected directly by citizens. It is for this reason that, in performing his duties, the President functions on the aid and advise of the government.
However, it is also the President who is regarded as the Head of the State, and takes the oath to ‘protect and defend the Constitution and law’ (Article 60 of the Constitution). In order to elect a figure head who would embody the higher ideals and values of the Constitution, the Constituent Assembly decided upon an indirect method for the election of the President.
The President is elected by an Electoral College. While deciding on who would make up the electoral college, the Constituent Assembly had debated several ideas. Dr. B.R Ambedkar noted that the powers of the President extend both to the administration of the centre as well as to that of the states. Hence, in the election of the President, not only should Members of Parliament (MPs) play a part, but Members of the state legislative assemblies (MLAs) should also have a voice. Further, in relation to the centre, some members suggested that the college should comprise only members of the Lok Sabha since they are directly elected by the people. However, others argued that members of Rajya Sabha must be included as well since they are elected by members of directly elected state assemblies. Consequently, the Electoral College comprises all 776 MPs from both houses, and 4120 MLAs from all states. Note that MLCs of states with legislative councils are not part of the Electoral College.
Another aspect that was discussed by the Constituent Assembly was that of the balance of representation between the centre and the states in the Electoral College. The questions of how the votes of MPs and MLAs should be regarded, and if there should be a consideration of weightage of votes were raised. Eventually, it was decided that a ‘system of Proportional Representation’ would be adopted, and voting would be conducted according to the ‘single transferable vote system’.
Under the system of proportional representation, the total weightage of all MLA votes equals the total value of that of the MPs. However, the weightage of the votes of the MLAs varies on the basis of the population of their respective states. For example, the vote of an MLA from Uttar Pradesh would be given higher weightage than the vote of an MLA from a less populous state like Sikkim.
Under the single transferable vote system, every voter has one vote and can mark preferences against contesting candidates. To win the election, candidates need to secure a certain quota of votes. A detailed explanation of how this system plays out is captured in the infographic below.
Sources: Constitution of India; ECI Handbook; PRS.
Coming to the Presidential election to be held next month, the quota of votes required to be secured by the winning candidate is 5,49,452 votes. The distribution of the vote-share of various political parties as per their strength in Parliament and state assemblies looks like this:
Note that the last date for filing nominations is June 28th. In the next few days, political parties will be working across party lines to build consensus and secure the required votes for their projected candidates.
[The infographic on the process of elections was created by Jagriti Arora, currently an Intern at PRS.]
