India Business Climate Improved But Needs Transformative Reforms: World Bank

Washington: Underlining that India needs "transformative reforms" to boost its economy, the World Bank on Tuesday said the country has witnessed "fast-paced" reforms in past two years with the government encouraging digitisation, streamlining electricity supply and supporting manufacturing.

"The country has embarked on a fast-paced reform path," the international lender's Ease of Doing Business 2017 Report said.

The report "acknowledges several substantial improvements".

Titled 'India has embarked on an ambitious reform path', the report said that the current Indian government was elected in 2014 on a platform of increasing job creation, mostly through encouraging investment in the manufacturing sector.

Soon after the elections policymakers realised for this to happen substantial improvements would be needed in India's overall business regulatory environment, it said, adding that 'Doing Business' indicators were employed as one of the main measures to monitor improvements in India's business climate.

"As a result of the election platform-driven reform agenda, over the past two years the 'Doing Business' report has served as an effective tool to design and implement business regulatory reforms," the report said.

The data presented by 'Doing Business' indicators have led to a clear realisation that India is in need of transformative reforms. The World Bank said India has achieved significant reductions in the time and cost to provide electricity to businesses.

In 2015-16, the utility in Delhi streamlined the connection process for new commercial electricity connections by allowing consumers to obtain connections for up to 200 KW capacity to low-tension networks.

"This reform led to the simplification of the commercial electricity connection process in two ways. First, it

eliminated the need to purchase and install a distribution transformer and related connection materials, as the connection is now done directly to the distribution network, leading to a reduction in cost," it said.

"Secondly, the time required to conduct external connection works by the utility has been greatly reduced due to the low-tension connection and there is no longer a need to install a distribution transformer."

As a result, the time needed to connect to electricity was reduced from 138 days in 2013-14 to 45 days in 2015-16. And in the same period, the cost was reduced from 846 per cent of income per capita to 187 per cent.

India further made paying taxes easier by introducing an electronic system for paying employee state insurance contributions, the World Bank said.

In the area of trade, as of April 2016, the Customs Electronic Commerce Interchange Gateway portal allowed for the electronic filing of integrated customs declarations, bills of entry and shipping bills, reducing the time and cost for export and import documentary compliance, it noted.

The portal also facilitates data and communication exchanges between applicants and customs, reducing the time for export and import border compliance.

Additionally, an Integrated Risk Management System has become fully operational and ensured that all the consignments are selected based on the principles of risk management. Indian adopted the Companies (Amendment) Act (No 21) in May 2015.

"As a result, the minimum capital requirement for company incorporation was abolished and the requirement to obtain a certificate to commence business operations was eliminated. To improve court efficiency, the passage of the Commercial Courts, Commercial Divisions and Commercial Appellate Divisions Act of 2015 established effective mechanisms for addressing commercial cases," the Bank said.

In May 2016, the Indian government enacted the Insolvency and Bankruptcy Code, which - when it comes into effect - will overhaul the 60-year-old framework for company liquidation and introduce new insolvency practices, it said.

"The experience of implementing reforms based on Doing Business data has demonstrated to the government the significance of establishing clear stakeholder feedback mechanisms to close the gaps between policy formulation and implementation," it said.

"Finally, the government has also acknowledged the need to implement reforms across the country - not just in Mumbai and Delhi, which are the cities covered by Doing Business. Lawmakers have recommended the implementation of a large number of reforms across all states, going beyond the scope of Doing Business," the World Bank said.