World Bank’s Ease of Doing Business

 

Recently world bank has released the world bank’s Ease of Doing business 2020 survey.

 


India’s ranking has improved by 14 places to 63. India also figures in the top ten most improved countries in the world for the third consecutive year. India has significantly moved upward From being ranked 142 in 2014 to 63 in 2020.

Definition

 

Ease of doing business is a ranking system where each country is ranked based on their performance in parameters like Starting a business, getting electricity, paying taxes, etc. 

Ease of doing business survey assigns point against each parameter(Fig 1) and country rank is determined by aggregating all points against all indicators.

 

World bank ease of doing
Credit:-World bank

Explanation

 

In order to have better clarity lets consider one of the parameters “Starting a business”. Under this parameter, survey measures the performance of the country against Procedures, time, cost, and minimum capital to open a new business.

For example, An entrepreneur in Uganda will spend nearly a month and undertake 13 procedures to set up a new company but Danish(Denmark) entrepreneur can register a new business in just 3.5 days.

Therefore, Denmark has an advantage over Uganda under starting a business parameter and will get more points in the survey.

If we consider another parameter “Trading across borders”.

Cameroon, a Central African country takes over 200 hours(approx 9 days) to complete export border requirements for maritime transport. In contrast, it takes only 10 hours in Singapore.

Therefore, Singapore will get more marks than Cameroon under head  Trading across borders.

 Parameters for ranking

 

A nation’s ranking on the index is based on an average of 10 subindices:

Starting a business – Procedures, time, cost, and minimum capital to open a new business.

Dealing with construction permits – Procedures, time, and cost to build a warehouse.

Getting electricity – procedures, time, and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse.

Registering property – Procedures, time, and cost to register commercial real estate.

Getting credit – Strength of legal rights index, depth of credit information index.

Protecting investors – Indices on the extent of disclosure, the extent of director liability, and ease of shareholder suits.

Paying taxes – Number of taxes paid, hours per year spent preparing tax returns, and total tax payable as a share of gross profit.

Trading across borders – Number of documents, cost, and time necessary to export and import.

Enforcing contracts – Procedures, time, and cost to enforce a debt contract.

Resolving insolvency – The time, cost, and recovery rate (%) under a bankruptcy proceeding.

 

India’s point on few parameter in 2019(Last year)

 

Ease of doing business ranking motivated governments worldwide to undertake business reforms in order to bolster sustainable economic growth and bring in more investment in their country.

Global investors also consider The World Bank’s ease of doing business rank in order to invest in a country. 

China improvement under construction permit

China ease of doing business
Credit:-world Bank

 India’s performance

Greater level of ease of doing business is associated with a high level of entrepreneurship, more FDI, Improved business environment, etc.

 

Also Read: Tariff definition and explanation

 

Ease of doing business
Credit:-World Bank

India has been at the forefront of bringing reforms by

1>Implementation of the Insolvency and Bankruptcy Code (IBC).

2> Signing the Trade Facilitation Agreement at the World Trade Organisation in order to reform trade procedures and paperwork in India.  

3>Abatement of paperwork in favor of electronic filing of documents and single-window customs procedures.

Ease of ding business
India Improvement in different parameter Credit:-World bank

Because of the above reforms, India has also secured its place in the top 10 most improving economies.

Top ten ease of doing business
Credit:-World bank
top ease of doing business
Credit:-World Bank

This year Newzealand has topped the chart followed by Singapore and Hong Kong.

Summary:-In conclusion World bank ease of doing index compares business regulation in 190 economies through a set of parameters. The core idea is to analyzes regulation that encourages efficiency and supports the freedom to do business.

 

 

Reference:-World bank group doing business report.

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