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Ease of doing business: India fares better than other EMs, but cities lag

Over the past two years, India has made tremendous strides on the World Bank’s ease of doing business rankings, jumping from 130th rank in 2016 to 77th in 2018. 

Much of this improvement is on account of better performance on three parameters – dealing with construction permits, trading across borders and starting a business. 

Country-wise data shows that on some of these indicators, India now fares better than its emerging market competitors such as China, Vietnam and Bangladesh. 

Take dealing with construction permits, for instance. India has managed to reduce not only the number of procedures involved from thirty in 2018 to eighteen in 2019, but has also managed to reduce the time taken to 95 days from 144 days earlier. 

In comparison, it takes 155 days to complete 20 procedures to obtain construction permits in China, while in Bangladesh it takes as many as 274 days to clear just 16 procedures.

However, a closer look at the city-wise data for India reveals that despite this improvement, some extremely time-consuming procedures haven't been made easier yet. 

For instance, it continues to take 29 days in Mumbai to obtain intimation of disapproval and pay fees to the building proposal office of the Municipal Corporation Greater Mumbai (MCGM). Similarly, obtaining an extract of the property register card (P.R. Card) from the Revenue Department still takes 17 days.

In Delhi, it continues to take 34 days for an on-site inspection for water and sewer connection and to receive approval from the Delhi Jal Board. Similarly, it still takes 30 days to obtain a completion/occupancy permit from the Municipal Corporation of Delhi.

On trading across borders, India’s score has improved sharply over the past year with a fall in both time to export (including documentary compliance) and cost to export. But while China is still ahead, India now fares better than both Vietnam and Bangladesh on these indicators. 

City-wise data shows that in the case of exports, it now takes 12 hours to obtain necessary clearances and for inspection by custom authorities in Mumbai, down from 34 hours earlier. While in the case of port or border handling for imports, time taken has fallen from 196 hours to 78 hours. 

In comparison, it takes six hours for clearance and inspection by customs authorities in Shanghai, while port or border handling in the case of imports typically take 48 hours 

In starting a business too, India has moved up from 156th in 2017 to 137th in 2018, faring better than Bangladesh and Brazil. Improvement on this indicator is partly because it now takes four days to obtain a goods and service tax (GST) registration number as compared to 7-10 days to register for VAT and profession tax under the earlier indirect tax regime. 

One indicator where India hasn't registered the gains it had hoped for is payment of taxes. The country’s rank fell from 119 in 2017 to 121 in 2018, despite its score improving marginally from 65.23 to 65.36 over the period. 

A closer look reveals that the country’s performance on the time taken to file tax returns has deteriorated sharply in both Mumbai and Delhi, from 216 hours to 275 hours over this period.

A large part this fall has been driven by time taken to file central sales tax/GST returns (July to December 2017), which takes 164.5 hours now, up from 105 hours under the previous indirect tax regime.

In comparison, it takes only 48 hours to file Value added tax (VAT) returns in Shanghai.

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