Ease of Doing Business: India’s Climb and the Debate Around It

Can a country’s entire business environment be captured in a single number? That is essentially what the World Bank’s Ease of Doing Business (EODB) ranking tries to do. India climbed rapidly up this ladder, reaching 63rd place globally. But the ranking itself has faced tough questions about what it measures, what it misses, and whether it can truly tell investors how easy or difficult it is to set up shop in a country. The story spans India’s ranking journey, the reforms that drove it, the areas still lagging behind, and a critical look at whether the ranking tells the full story.

How the Ranking Works

The World Bank’s EODB ranking evaluates countries on 10 specific parameters that affect the lifecycle of a business:

• Starting a business : procedures, time, and cost to launch a company
• Getting construction permits : approvals needed for building infrastructure
• Securing electricity : time and cost of getting a power connection
• Registering property : steps and costs involved in transferring ownership
• Getting credit : strength of legal rights and depth of credit information
• Protecting minority investors : safeguards for small shareholders
• Paying taxes : number of payments, time spent, and total tax rate
• Cross-border trade : time and cost for import and export processes
• Enforcing contracts : time, cost, and quality of judicial processes for disputes
• Resolving insolvency : speed and outcome of bankruptcy proceedings

One important detail: for India, the survey only looks at two cities, Mumbai and Delhi. It does not cover the rest of the country.

India’s Performance: A Big Leap

India made striking progress in the EODB ranking, reaching 63rd place in the Doing Business 2020 report. This made India the top-ranked country in South Asia and the third-highest among BRICS nations (Brazil, Russia, India, China, South Africa).

This jump did not happen by accident. It was the result of targeted reforms across several of the 10 parameters.

Reforms Behind the Rise

The government introduced a series of measures, each aimed at a specific bottleneck in the business environment:

Simplifying Taxes

• Goods and Services Tax (GST) : Before GST, businesses faced a patchwork of central taxes, state taxes, and local levies that varied from state to state. GST replaced this maze with a single unified indirect tax system. It is considered one of the biggest reform measures in India’s economic history because it turned a fragmented domestic market into one common market.

• Income Computation and Disclosure Standards (ICDS) : Introduced in 2016, ICDS standardised how businesses compute and report income for tax purposes. It made online tax payments simpler and improved the government’s ability to collect reliable data.

Handling Failed Businesses

• Insolvency and Bankruptcy Code (IBC) : Before the IBC, winding up a failed company could drag on for years, even decades. The code established a clear, time-bound process that made it significantly easier and faster to take necessary action against companies that could not repay their debts.

Fixing Power Supply

• UDAY scheme : The Ujwal DISCOM Assurance Yojana was a financial rescue package for struggling state-owned power distribution companies. Reliable and affordable electricity is essential for any business, so improving the financial health of power companies directly helped on the ‘securing electricity’ parameter.

Protecting Investors

• SEBI reforms : The Securities and Exchange Board of India took several steps to strengthen protections for minority investors. It rationalised KYC (Know Your Customer) norms, so the paperwork investors face became less burdensome. It increased the number of arbitration centres (forums where investment disputes can be resolved outside regular courts), and it simplified FPI (Foreign Portfolio Investor) regulations to make it easier for foreign money to flow into Indian markets.

Speeding Up Trade

• SWIFT portal : The Central Board of Excise and Customs (CBEC) launched the Single Window Interface for Facilitating Trade (SWIFT) portal. Its purpose was simple: speed up the clearance of goods arriving at Indian ports. Faster customs clearance means lower warehousing costs and quicker delivery for businesses that depend on imported inputs.

Making It Easier to Start a Business

• SPICe form : The government merged applications for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number) with the SPICe form (Simplified Proforma for Incorporating Company Electronically). This meant an entrepreneur could incorporate a company, get a PAN, and get a TAN in a single step instead of running between three separate agencies.

• GST registration : Registering for GST was made faster, so new businesses could start selling and collecting tax with less waiting time.

Speeding Up Construction Approvals

• Online building permits : India implemented an online single-window system for the approval of building plans. Instead of visiting multiple offices with stacks of paper, builders could submit everything digitally in one place.

The Challenges That Remain

Despite the improvements, several areas continued to hold India back from climbing even higher:

Construction Permits Still Too Slow

Even with the online system, getting all the municipal permits for a construction project remained cumbersome. States needed to do more to bring every single approval step online through a genuine single-window clearance, rather than digitising only part of the process.

Starting a Business: Room for Improvement

While the SPICe form simplified incorporation, the broader startup ecosystem still needed work. Better implementation of Startup India-type schemes, further simplification of the clearance process, and wider adoption of self-certification would make it genuinely easy for a first-time entrepreneur to get started.

Contract Enforcement: A Deep Structural Problem

Enforcing a business contract through Indian courts can take years. Fixing this requires multiple interventions:

• Commercial courts : Dedicated courts that only handle business disputes, staffed by judges trained in commercial law
• Alternate dispute resolution : Strengthening mechanisms like mediation (where a neutral third party helps disputing sides reach an agreement) and arbitration (where a private decision-maker settles the dispute outside court)
• Model Bilateral Investment Treaty (BIT) : The treaty template governing India’s investment agreements with other countries needed amendment. Diluting the Investor-State Dispute Settlement (ISDS) mechanism (a system that allows foreign investors to challenge a host government before an international tribunal) was making India less attractive to foreign investors

Environmental and Social Clearances

Projects that skip or rush through Environmental Impact Assessment (EIA) and Social Impact Assessment (SIA) often face trouble later, through legal challenges, community protests, or regulatory shutdowns. The solution is not fewer clearances but stricter upfront implementation, so that once a project is approved, it does not get stuck at a later stage.

Labour Law Rigidity

India’s labour laws were built for a different era and needed comprehensive reform. Key pending changes included:

• Factories Amendment Bill : to update rules around overtime and working hours
• Employee Compensation Amendment Bill : to modernise the framework for compensating injured workers
• Model Shops and Establishments Bill : to allow businesses to operate around the clock (24/7) where needed

More broadly, the process of hiring and letting go of workers needed to become more transparent and predictable, so that companies could respond to changing business conditions without navigating an obstacle course of regulations.

A Critical Look at the Ranking Itself

India’s climb in the EODB ranking is worth celebrating, but the ranking framework itself has drawn significant criticism. Some of these concerns are important for any serious student of economics to understand:

Too Narrow a Geographic Sample

The ranking for India is based only on what happens in Mumbai and Delhi. A factory owner in Patna or a startup founder in Guwahati faces a very different regulatory environment. The World Bank acknowledged this limitation and was working on developing district-wise rankings to provide a more complete picture.

Limited Set of Indicators

The World Bank deliberately measures a few indicators in great depth rather than trying to be comprehensive. This means many aspects of the business environment, such as infrastructure quality, market size, workforce skills, and technological readiness, fall outside the ranking entirely.

Missing the Qualitative Picture

Numbers can tell you how many days it takes to register a property, but they cannot tell you whether the local officials are cooperative or whether the political environment is stable. The EODB index does not factor in a country’s health and education standards, its political climate, or the strength of key institutions. A supportive business environment depends on all of these, not just on regulatory procedures.

Allegations of Bias

Nobel Prize winner Paul Romer, while serving as the World Bank’s Chief Economist, raised serious concerns about the ranking. He suggested that the methodology carried biases and alleged that political motivations of World Bank staff influenced how certain countries were scored. He also questioned the repeated changes in the methodology used to calculate rankings, arguing that these shifts made year-on-year comparisons unreliable.

A Backward-Looking Lens

Critics have pointed out that the EODB report tends to confine itself to reviewing old rules and regulations rather than taking a forward-looking or nuanced view of how regulation actually works on the ground. A rule on paper and its enforcement in practice can be very different things.

Why the Ranking Still Matters

Despite all these limitations, the EODB ranking serves as the most widely trusted ready reckoner for foreign investors deciding where to set up operations. When a multinational company is choosing between India, Vietnam, and Indonesia, the EODB ranking is often one of the first data points it checks.

For India, the ranking improvement signals real progress: procedures have been streamlined, digital systems have replaced paper-based approvals, and the government has shown the willingness to tackle difficult structural problems. The challenge going forward is to extend these reforms beyond Mumbai and Delhi, tackle the harder areas like contract enforcement and labour law overhaul, and ensure that the improvements visible in the ranking translate into on-the-ground reality for businesses across the country.