Ease of Doing Business: How India is Improving its Global Rank

India’s startup ecosystem has been booming over the last few years, largely due to the country's efforts to create a more business-friendly environment. A significant factor behind this growth has been the government’s proactive reforms aimed at improving the Ease of Doing Business (EODB), as measured by the World Bank’s annual ranking. These reforms have made it easier for entrepreneurs to start and scale businesses by simplifying regulations, reducing red tape, and making the legal and taxation framework more efficient.

A Journey of Progress

India's EODB ranking has shown significant improvement over the last few years. In 2014, India ranked 142nd, and by 2020, it had jumped to 63rd place in the World Bank’s rankings. This meteoric rise can be attributed to key reforms that have been implemented across multiple dimensions of doing business. These reforms have helped foster a supportive environment for startups, making it easier for young companies to operate and grow.

Key Reforms Driving Improvement

1. Starting a Business: Simplified Procedures

One of the biggest bottlenecks for startups traditionally has been the number of days required to legally set up a business. To address this, the government introduced online company incorporation services, allowing entrepreneurs to register their businesses within just a few days. Furthermore, the integration of multiple government portals, such as the Ministry of Corporate Affairs (MCA), has expedited procedures by reducing the number of steps for registration and cutting down bureaucratic delays.

2. Resolving Insolvency: The Insolvency and Bankruptcy Code (IBC)

The Insolvency and Bankruptcy Code (IBC) of 2016 was a game-changer, providing a streamlined framework for resolving business insolvency. Prior to this, India’s inefficient and slow insolvency resolution process was a major hindrance for investors and businesses. The IBC has brought predictability to business failures and restructuring, improving investor confidence, and ensuring quicker recovery of dues, which has been especially beneficial for startups facing financial challenges.

3. Tax Reforms: GST Implementation

The introduction of the Goods and Services Tax (GST) in 2017 was a critical reform aimed at simplifying India's complex tax structure. GST has consolidated multiple taxes into a single, simplified system. Startups, particularly those involved in inter-state commerce, have greatly benefited from the uniform tax regime. According to the Startup India report, over 50,000 startups have been registered since GST's implementation, highlighting its role in easing business operations.

4. Digital Reforms and Infrastructure: Improving Transparency

A key factor in improving India’s EODB ranking has been the Digital India initiative, which has leveraged technology to increase transparency, reduce paperwork, and cut delays. Online platforms like GeM (Government e-Marketplace) and digital payment systems have provided greater access to resources for startups and small businesses. The use of e-signatures, digital certificates, and online documentation has also made government-business interactions faster and more efficient.

5. Enforcing Contracts: Judicial Reforms

The Commercial Courts Act of 2015, which created specialized courts to deal with business-related disputes, has significantly shortened the time taken to resolve legal disputes. While India still lags in contract enforcement compared to many developed countries, the recent reforms have made legal recourse much easier and more predictable for businesses, including startups.

The Impact on the Startup Ecosystem

The reforms have not only improved India’s EODB ranking but have also attracted both domestic and international investors, eager to back Indian startups. From a startup perspective, ease of access to capital, simplified compliance, and transparent regulations have been critical to growth.

• As per the Economic Survey of 2022-23, over 100 unicorns have emerged in India, and startups have attracted nearly $10 billion in funding in 2022 alone.

• The rise of startups in Tier 2 and Tier 3 cities is another significant indicator of the success of the government’s reforms. More than 55% of Indian startups are now coming from smaller cities, thanks to initiatives that make it easier to do business outside of major urban centers.
  

Challenges and Future Outlook

While India has made remarkable progress, challenges remain in areas such as land acquisition, infrastructure bottlenecks, and labour laws. Moving forward, addressing these hurdles will be critical in sustaining the momentum and improving India's ranking further.

Additionally, focus areas like the intellectual property rights (IPR) framework, data privacy laws, and improving access to finance will continue to be essential for creating a startup ecosystem that can compete on a global scale.

Key Takeaways for Startups and Investors

• Simplified Procedures: Government reforms have significantly reduced the time taken to start and run businesses, making it easier for startups to focus on innovation and growth.

• Insolvency Framework: With the implementation of the IBC, entrepreneurs have a structured exit strategy, which encourages risk-taking and investment.

• Tax Incentives: The introduction of GST and other tax reforms has eased the compliance burden, especially for new and small businesses.

• Technological Infrastructure: Government initiatives like Digital India and online platforms have made regulatory compliance and access to services seamless for entrepreneurs.
  

India’s remarkable rise in the Ease of Doing Business ranking is a testament to the country’s dedication to nurturing its startup ecosystem. The government's reforms have created an environment where startups can thrive, grow, and compete globally. As India continues to implement strategic reforms, it is poised to become one of the world’s most startup-friendly nations, offering immense opportunities for entrepreneurs, investors, and innovators.

This article provides an in-depth look at India's efforts to simplify business operations for startups, offering key takeaways for entrepreneurs and investors alike.