Working Paper 12 (2015)

Suggested Citation
Gupta, H; Kapoor, T. & Asudani, J. 2015 ‘[Un]ease of Doing Business in India – A Review of Major Pain Points and Possible Lessons’, CIRC Working Paper No.12. New Delhi: CUTS Institute for Regulation & Competition.

Author Bio:
Honey Gupta is a Junior Fellow at CUTS Institute for Competition & Regulation.

Tunisha Kapoor is a Research Associate at CUTS International, CUTS Centre for Competition, Investment & Economic Regulation.

Jitin Asudani is Assistant Policy Analyst at CUTS International, CUTS Centre for Competition, Investment & Economic Regulation.

Published By:

CUTS Institute for Regulation & Competition
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One of the more influential challenges that India is today contended with is the need to improve its business climate, both in letter and spirit. The bureaucratic overdrive to repair the situation is fuelled by the latest World Bank rankings on one hand and the urgent need to support the ambitious national slogan-‘Make in India’, on the other. The Doing Business 2015 rankings show India notably ‘uneasy’, at a depressing 142 out of 189 countries ranked, having actually slipped two ranks (140) from the previous year world order. Most of the entire business life cycle right from starting a business, running it and to exit is indeed bothered by inefficient and lengthy procedures, lack of information and weak accountability that make it cumbersome and expensive to conduct business in India.

As India now wants to make some serious regulatory repair, it might be worthwhile to start fixing the last few indicators of doing business, first. A possible approach could be to concentrate on the most distressing indicators (those that are ranked beyond 150), and map these across comparable economies, say BRICS. As against targeting a particular rank for India, such an approach can help draw useful lessons and inform the policies on incremental steps taken by select countries overtime on the specific indicators. This paper focuses on the four worst indicators – enforcing contracts (186), Dealing with Construction Permits (184), Starting a Business (158) and Paying Taxes (156).

1. Introduction
India clearly wants to be in the game, quickly shedding the idiosyncrasies that have long blotted its business climate as painful, corruption-ridden and unfriendly. As the world looks to India with great hope and potential, India can ill-afford to let perceptions and analyses of its business regulatory environment continue to indicate indiscipline and hopelessness, much less being anywhere close to the bottom of the pack

The present situation, however, is grim, far from optimal. The release of the 2015 ‘Doing Business’ rankings by the World Bank (WB) show India notably ‘uneasy’, at a depressing 142 out of 189 countries ranked, having actually slipped two ranks (140) from the previous year order.

The ranking announcement seems to have suddenly ‘shaken-up’ the nation, with business houses, analysts and quite importantly, the incumbent Government itself getting into an overdrive mode–realising the urgent need to dump the languid, business-as-usual approach and pace up relevant institutional reforms.

Considering that the latest WB assessment might have missed recent developments and in view of direct measures currently underway (online approval for 200 permits etc.1), the Government is hoping to see an upswing in the forthcoming rating anyway. The Government has reinforced this hope by setting itself an ambitious target rank of being in the top 50, to be achieved over the next two years. Eschewing from making any claim on rank jump, this paper attempts a bottoms-up approach to look at the worst ranked areas in doing business in India that must necessarily be addressed to expect any momentous improvement. These select areas are then mapped across comparable economies to review their reform pathway overtime and draw lessons.

The ranking might have limitations and the target difficult, but the urgency to improve cannot be over emphasised. While taking the discussion forward, it’s useful to bear in mind that these rankings: 1) might not be comparable2 across nations for various contextual factors, and 2) these are relative and, therefore, a change in ranking between years might not necessarily mean absolute improvement or degradation in the regulatory environment of the country. This means if one country moves up in a year, another will necessarily move down.

Several countries, including India and China, have expressed concerns about the country’s ranking in the report. The recent change in the WB methodology, based on the Distance to Frontier (DTF), is perhaps a better measure of a country’s performance. The DTF tries to capture the actual distance each economy has to traverse to reach the ‘frontier’ of best performance, which is set at 100. DTF shows what has been achieved and how much more needs to be done. The dichotomy in case of India makes the point clearer; India slipped two ranks from 142 to 140 but it has improved on the DTF score from 52.8 to 54 between 2014 and 2015.

While the actual current position of India in facilitating businesses is perhaps unknown and subject to debate, the imperative need for India to improve on the regulatory environment, and reduce implementation bottlenecks is undisputed.

2. Major pain points for India
The subsequent sections attempt to discuss the weaker indicators that contribute to the overall ranking for India and how these could be bolstered through specific reforms, which are both urgent and doable. An assessment of good practices and institutional changes in comparable countries is also made to draw possible lessons. In order to set a focussed direction for India while also keeping the comparison rational, the discussion below looks at:1) the four worst indicators (rank based) for India and 2) how these indicators score across economies comprising the Brazil Russia India China and South Africa (BRICS).

On the distance to frontier scale as also rankings across the five countries in BRICS for 2014 and 2015 (Figure 1 below), India clearly lags on both accounts.

A review of the past rankings for India show similarly poor results for the abovementioned four indicators.

Notably, some of these (starting a business and dealing with construction permits) indicators are among the bottom four in most other BRICS countries as well (analysed for 2014 and 2015). Enforcing contracts (ranked 186, DTF-25.8) however is particularly bad in case of India. Likewise, in case of paying taxes, the only other country in the group that does worse than India (156) is Brazil (177). Brazil also performs even poorer than India in starting a business, with a rank of 167 while India ranks 158.

The discussion below deals with each of the above-mentioned four indicators, separately.

Table 2: Indicator Ranking Across the BRICS Countries

2.1. Enforcing Contracts (186)
While the substantive governing legislation for contracts, laying down the general principles on formation, performance and enforceability of contracts in India is the Indian Contract Act, 1872; the procedural law for civil cases adjudication by Courts is essentially the Civil Procedure Code, 1908.

Businesses, particularly small and medium, should be able to depend on the courts to protect their legal rights and deliver speedy justice. In India, the situation is unfortunately quite the contrary. Indian judiciary is characterised by extraordinary delays, corruption and complex filing

Apart from Courts, there are other mechanisms to enforce contracts – usually availed of before judiciary and provided for in contracts. The Arbitration and Conciliation Act, 1996 provides for conciliation, mediation and arbitration as other means of settling disputes, alternatives to adjudication through courts. Arbitration is specifically for commercial disputes. While the Arbitration and Conciliation Act of 1996 has improved matters by imposing some finality to arbitral proceedings, there are still complaints about loopholes3. Institutional arbitration is yet to emerge as a preferred means of dispute resolution among Indian companies4. Recent amendments by the new Government in the Arbitration and Conciliations Act to speed up commercial dispute resolution by setting up fast track courts5, brought about through an ordinance can prove to be helpful

At the same time, speedy disposal of cases requires consideration of many other factors as well. A recent Discussion Paper by CUTS6 International makes insightful observations on how shortage of judges and courts, lack of performance assessment of judges, inadequate case management practices and slothful pace of reforms have all contributed to staggering arrears in
disposal of cases across various courts. Businesses are deeply affected as commercial disputes remain pending for long, soaking up expensive time, administrative capacity and financial resources. Such a scenario makes it prohibitively expensive for smaller firms to pursue court cases and may even drive them out of business. Some of the key challenges for Indian judiciary are:

Backlog Of Pending Cases
India’s legal system has the largest backlog of pending cases in the world – as many as 30million pending cases7. This number is consistently on the rise, which is symptomatic of an increasing inadequacy of the legal system. According to Freedom in the World 2013 Report, the Indian court system is severely backlogged and understaffed, and there are currently millions of pending civil and criminal cases – many of these involving companies. Whereas the need to enhance strength of the judges and creating more courts is frequently felt, but the implementation of corresponding recommendations too has been inadequate

At the same time, certain steps being considered might have varied implications. For example, the Government has proposed to amend the Negotiable Instruments Act (N.I. Act) to decriminalise the offence of dishonoring of cheques; a move essentially aimed at decongesting the judicial system8. It has been estimated that about 30 percent of criminal cases in Indian courts are either cheque bouncing or traffic offences. While there are valid reasons for the reform, but the N.I. Act did provide considerable legal certainty particularly when seen in the context of weak contract enforcement. The proposed withdrawal of section 138 of the Negotiable Instruments Act will increase the civil court burden, offsetting some of the gains expected from decongesting criminal courts.

Government Litigation
The Government itself is a major litigant, perhaps the biggest contributor to the huge backlog jamming the courts. The Centre, States and public sector companies untiringly appeal most adverse verdicts, despite winning only a small minority of them eventually. A project titled LARGE (Legal Adjustments and Reforms for Globalising the Economy) commissioned by the Ministry of Finance in cooperation with United Nations Development Programme(UNDP) in 1993 observed that the Government is a litigant in 60 percent of civil suits, sometimes on both sides, with 90 percent of these appeals failing9. Perhaps alarmed by these findings, the State Law Ministers, in December 1994, decided that disputes involving two government bodies should be resolved outside the court system. However, the decision was not implemented. More recently in 2010, the Centre introduced the National Litigation Policy of India (NLPI) in recognition of the Government and its various agencies being the pre-dominant litigants in courts and Tribunals in the country. The policy aims to transform Government into an Efficient and Responsible litigant and reduce Government litigation in courts to achieve the goal in the National Legal Mission to reduce average pendency time from 15 years to three years. However, the policy was not implemented in India till October 1. These government cases not only cost the exchequer but also absorb valuable time of the courts both of which could be gainfully employed instead towards speedier delivery of justice.11

Corruption In Judiciary
Like many other institutions of the Government, the Indian judicial system is deeply plagued by corruption. As per the Global Corruption Barometer 2013 by Transparency International (TI) – it was found that 45 percent of respondents in India felt that judiciary was corrupt or extremely corrupt; 36 percent reported paying a bribe to the Judiciary. As such, there is no provision for registering an FIR against a judge taking bribes without taking the permission of the Chief Justice of India. The media has been best able to energise public debates and few mass uprisings; it is also not completely trusted to act in an unbiased and independent manner

Lack Of Transparency
Another problem facing the Indian judicial system is the lack of transparency. It is seen that the legal system is totally out of the ambit of the Right to Information (RTI) Act. Thus, in the functioning of the judiciary, the substantial issues like the quality of justice and accountability are not known properly12.

Enforcement Of Foreign Judgments
A foreign judgment can be enforced by courts in India only if the foreign court is in a ‘reciprocating territory’ i.e. if India has reciprocal arrangement with that country for enforcement of judgments. The number of ‘reciprocating territories’ with which India presently has such treaties is limited. International arbitration has also often been criticised for interference by the Indian Judiciary even as it is fast emerging as the preferred option for resolving cross-border commercial disputes. Enforcement of foreign awards through Arbitration in India, (as provided by Part II of the Arbitration and Conciliation Act 1996), follow the New York Convention or the Geneva Convention. However, unlike most other Convention states, India has not officially recognised all the signatories to the New York Convention. Indian courts will, therefore, only enforce foreign awards, under the New York Convention if they have been issued in a state that has been notified in the Official Gazette of India as a country to which the New York Convention applies13. Even where international arbitration awards have been made in a notified country, enforcement in India has been an issue, largely contributed by the interventionist approach of the Indian Judiciary or denial of enforcement on the grounds of public policy. With some recent pro-arbitration Supreme Court rulings things have started looking positive, but it remains an issue and many businesses still choose Singapore and London as the more preferred seat for International arbitration rather than India.

Furthermore, Doing Business rankings test ‘enforcing contracts’ on three broad parameters of time, cost and procedural steps to follow. Drawing a comparative assessment (table 3 below), it takes about three years and ten months to get a contract enforced in India as against one year and three months in China and less than a year (267 days) in Russia.

Table 3: Enforcing Contract – Comparison across BRICS
The break-up of the three parameters constituting efficiency of contract enforcement in India, as evaluated by the DB rankings are shown below. While the number of procedures is still comparable across the five countries, the time and cost (as percent of claim) are significantly high in case of India. Time taken for trial and judgment in India constitutes about 80 percent of the total time required to conclude a case as against less than 50 percent in case of China and about 60 percent in case of Russia.

Time taken to enforce the judgment is unreasonably high in India; even after getting a judgment in your favour, it takes 305 days to enforce the judgment. At the same time, the attorney costs in India is as high as about 31 percent of the claim; standing in stark contrast to about 8-10 percent in case of China and about 10-15 percent in case of Russia. In case of South Africa, the attorney cost is about 23 percent.

Procedures To Enforce A Contract Through The

courts (number): 46
Steps to file and serve the case 11
Steps for trial and judgment 21
Steps to enforce the judgment 14

Time Required To Complete Procedures

(calendar days): 1,420
Time to file and serve the case 20
Time for trial & obtaining judgment 1,095
Time to enforce the judgment 305

Cost Required To Complete Procedures (% Of Claim):

claim):: 39.6
Average attorney fees 30.6
Court costs 8.5
Enforcement costs 0.5

A study by CII-KPMG, 2014
A recent survey found that in case of obstacles faced in contract enforcement in India, respondents felt that while time involved is a major issue, enforcing a judgment is an equally big challenge.

Judicial Reforms: International Experience
The timeline traces some of the judicial reforms undertaken by Brazil, Russia, China and South Africa through the last many years. A lot of emphasis in recent years has been on using technology to manage case filing and speed up resolution. Substantial focus has also been made to strengthen enforcement of judgments.

As the figure above reveals, all the countries in the group seem to have made very little year-on-year progress on the score, represented by almost flat lines. Although, Russia, which undertook reforms quite early and consistently, over the years is logically much better placed than the others.

Brazil has improved marginally from around 52 to 53 between 2012 and 2013, most likely on the basis of having introduced electronic system of filing complaints. China, despite having made certain reforms in 2009 and 2014 has seen a negative slope in the DTF scores; perhaps ICT intervention has not been significant. India has remained farthest from the frontier and any change/reform during the years has failed to influence the DTF score.

Drawing on some of the reforms undertaken by member countries of BRICS, the following section discusses certain recommendations to improve contract enforcement in India.


Enforcing judgments
This has been widely noted as a major issue in commercial dispute resolution in India. It may be worthwhile for India to consider the Chinese model. China has set up a separate and relatively independent enforcement bureau within the courts. The civil adjudicating procedure reform, separating adjudication from petition filing and judgement enforcement, has made it possible to trace the process of cases being enforced and also to hold individual judges accountable for the cases that they are assigned to handle

The courts have also encouraged plaintiffs to take pre-emptive action to protect their business interests. The enforcement bureau of the courts requires judges in the petition filing and adjudication divisions to inform plaintiffs of the availability of the Asset Preservation, a procedure whereby plaintiffs, by providing security, can ask the courts to freeze the assets of the other party. This procedure has been very useful both during the enforcement phase and prior to enforcement, because litigant parties are more likely to resolve their disputes through mediation or voluntarily withdraw their suits when the defendants know that they will not be able to delay or avoid enforcement should a judgment be rendered against them.14

Increased professionalism of China courts has also had a positive impact on enforcement. The Judges Law, amended in 2001, requires all judges to pass the National Uniform Judicial Exam, leading to more qualified judges. In addition, judges’ salaries have generally been increased, in part due to sufficient financial resources being supplied by local governments. The income-level of judges has generally been much higher than the local Gross Democratic Product (GDP) per capita.15

Even as these observations are made, it is important to acknowledge some significant reforms being currently advanced for the civil justice system in India. The Law Commission has recently submitted it 253rd report – The Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015, to the Ministry of Law and Justice, recommending a new law to set up exclusive commercial courts and commercial divisions in the high courts across the country to ensure speedy disposal of high value commercial suits. The law commission has also suggested changes in the Civil Procedure Code, 1908, which lays down rules for the courts to adjudicate such disputes. The institution of these exclusive courts and division will be helpful in faster resolution of commercial disputes and inducing business growth.

Foreign judgments
India should identify current and potential business partners and sign treaties with most such countries in order to boost investor confidence in Indian judiciary. The process of enforcement of foreign judgments should be streamlined and definite time limits should be provided for achieving closure on their enforcement.

Leverage ICT: Electronic Case Filing
It is possible to achieve a substantive degree of time and cost efficiency through reduction in physical paperwork and migrating to virtual or electronic case filing system. Though the process of e-filing of proceedings has been initiated by the Supreme Court and some high courts, it needs to flow to the courts at all levels. This would essentially involve modernising the IT infrastructure and amendment in laws and regulations. An electronic case filing system would typically facilitate electronic submission, registration, service notification and access to court documents. Implementation of e-court systems results in substantial savings from a reduction in the use of paper, time spent in court, cheaper service of process, low transportation costs, easy archiving of documents and payment of fees. While Brazil and Russia have introduced ICT in case filing, Korea was a pioneer in leveraging technology – having launched electronic case management in the mid1980s.

Alternative Dispute Resolution
Despite the new Arbitration and Conciliation Act 1996 adopted by India on the lines of the United Nations Commission on International Trade Law (UNCITRAL) model law of Arbitration, Courts routinely have to interfere as losing parties challenge the arbitral awards, under section 34 of the Act. Among others, intervention on grounds of ‘public policy’ in particular has been a usual threat to the arbitral awards. While assistance of the courts is necessary for the smooth functioning of the arbitration system, since the courts have statutory powers to execute and enforce an order, these supervisory powers should be exercised with caution with least interference in the arbitral process. In some recent instances, High Courts and the Supreme Court have realised the importance of protecting the arbitration, but the scope of challenge should be systemically restricted through amendment to the Act and finality of arbitral award should be reinforced.

Together with this, increased Institutional arbitrations, use of expert witnesses, disclosure procedures with regard to conflict of interest of arbitrators16 and trained arbitrators can help establish more credibility in arbitral proceedings and awards. In addition, all Central and State Government contracts should specify mandated arbitration institutions, which should be set up in each State.

Apart from other direct benefits of strengthening the Arbitration mechanism, India will also be able restrict the huge outflow of money that Indian parties incur each year for choosing an international seat (Singapore, London) of arbitration instead of an Indian seat.

Case Management Practices17
Case management policy can yield remarkable results in achieving more disposal of cases and enhancing user-friendliness. Experience from countries, such as the UK, the US and Australia provide good leads. Case management refers to a judicial process that provides effective, efficient and purposeful judicial management to achieve a timely and qualitative resolution. Its mandate is for the Judge or an officer of the court to set a timetable and monitor a case from its initiation to its disposal. Importantly, it entails regular communication and above all assigning cases to alternative modes of dispute resolution. A Committee set up by the Supreme Court headed by the Chairman of the Law Commission, assessed the progress made in other countries and concluded that the case management system has yielded exceedingly good results.

Also, the Government should put in place mechanisms that can effectively check the avoidable contribution to the ever-increasing case pendency; should follow the National Litigation Policy and curb unnecessary litigation

Last but not the least, the National Mission on Justice Delivery and Legal Reforms, under the Department of Justice, need to be accelerated. The National Mission would help in implementing the two major goals of increasing access by reducing delays and arrears in the system and enhancing accountability at all levels through structural changes and setting performance standards and facilitating enhancement of capacities for achieving such performance standards18

2.2. Dealing with Construction Permits (184)
Construction projects whether Industrial, commercial or residential typically require obtaining approvals and clearances from various public departments to build the structure and connect it to water, electricity, sewerage and communication. In India, complying with building regulations to obtain construction permits is excessively costly, complicated and timeconsuming. Land and real estate development are State subjects; the procedure for obtaining clearances varies from city to city in terms of time and number of clearances as decided by the Urban Local Body/Urban Development Authority of city concerned. These city authorities are notorious for their uncooperative, rent-seeking ways. Whereas regulation of construction to ensure safety of life and environment is indeed important but unusually lengthy and complex compliance, lack of information, unofficial payments in addition to mandated fees constrain infrastructure development, often resulting in sub-standard construction quality. The situation is undesirable both from an economic standpoint as well as productivity.

Placed below is a broad regulatory framework governing the construction activity in India comprises multitude of authorities at various levels.

Table 4: Regulatory Environment for Construction Activity in India While we subsequently analyse this aspect through the doing business rankings, some of the key attributes that make seeking construction approval/permits challenging in India are:

Complex regulatory framework multiple laws/rules and authorities Coordination requirement with several State/Central-level departments Inadequate information and user-unfriendly interface Lack of transparency and endemic corruption High transaction costs

Going by the recent Doing Business 2015 rankings, India ranks an appalling 184 of all the 189 countries on the dealing with construction permits. Even within BRICS countries, where most countries seem to be struggling, India is the worst performing. Quite notably though, the aspect of construction permits looks equally wanting in case of China, Brazil and Russia as well; number of days it takes in these three countries for construction permits is even higher than India. This is little reason for comfort though; India is way too low on the distance to frontier (30.9) measure. Also, the cost of obtaining construction permits is abnormally high in India as compared to all other economies in the group. This cost includes only the official costs of procedures and does not account for money paid as bribes/informal payments.

On the other extreme is South Africa, way ahead of the pack ranking at 32 and with DTF of about 82. It takes less than 50 days to grant construction permits, costing less than 1 percent of the structure value, in stark contrast to an excessive 28 percent cost in case of India. South Africa also has the least number of procedures to comply with to obtain construction rights.
Table 5: Dealing with Construction Permits – Comparison across BRICS Countries The break-up of the three components involved in obtaining construction permits19 in India showing critical areas, as evaluated by the DB rankings for two cities – New Delhi and Mumbai, are tabulated below. While Mumbai takes far less number of days to grant the permits, it is significantly more expensive to obtain them in Mumbai than in New Delhi.

Table 6: Obtaining Construction Permits – New Delhi and Mumbai
However, there are signs of improvement as well. On a positive note, India has recently reduced the time required to obtain a building permit by establishing strict time limits for preconstruction approvals at the municipal-level. While India has gone down by one rank, it has inched closer to the frontier between 2014 and 2015 (from DTF score of 29.7 to 30.89). These are noteworthy but incremental improvements and a lot of ground still needs to be covered. Certain other bigger reforms are also underway. A high-level Committee headed by the former Cabinet Secretary T S R Subramanian, constituted by the Union Ministry of Environment, Forests and Climate Change (MoEF&CC) to review the environment laws in the country has very recently recommended a new over-arching law to streamline the process of environment clearances for development projects in the country.

The proposed new Environment Law Management Act (ELMA) will have two fulltime expert bodies – National Environment Management Authority (NEMA) and State Environment Management Authority (SEMA), to be constituted at the Central and State-levels respectively to evaluate project clearance (using technology and expertise), in a time bound manner, providing for single window clearance. A ‘fast track’ procedure for ‘linear’ projects (roads,railways and transmission lines), power and mining projects and for the ‘projects of national importance’ has also been prescribed in the new mechanism. Adoption and successful implementation of these reforms can do much to ease obtaining necessary environment clearances for undertaking construction.

Illustrated on a timeline below are relevant reforms undertaken by other countries, under BRICS. The Russian Federation seems to have made the biggest leap towards the frontier in last couple of years, from a DTF of 25.45 in 2010 to a remarkable 56.70 in

1. This is better than China’s climb on DTF from 24.4 to 43.75 between the same five-year period. This improvement in DTF scores is supported by some notable reforms made to ease construction permits, both by China and Russia during these years (figure 3 below). At the same time, South Africa only retained its position closest to the frontier (81.81 in 2010 to 81.65 in 2015) without any significant effort seen on reforms. In fact, while Russia established a one-stop shop to facilitate processing of construction permits, South Africa still does not have one.

Any notable reform on easing construction permits seems to have been made essentially by China and Russia within BRICS during the period mapped above. These reforms – whether to eliminate certain approval requirements or to reduce delays or introduction of single window mechanisms by China and Russia have mostly been effective. Russia has improved considerably from second lowest at 11.9 in 2004 to the second highest 56.7 in 2015. China has also been successful in progressing from the lowest-level of 9.1 in 2004 to a modest 43.8 by 2015. While Brazil and South Africa have both remained static at their levels during the last decade, South Africa is considered significantly advanced in managing construction permits. India has clearly not kept pace with the business needs, having improved only marginally (from 21.3 in 2004 to 30.9 in 2015) and being the farthest from the frontier among the BRICS.

Before attempting any prescription, it is important to clarify that construction as an activity will have to continue to be sufficiently regulated, given that the aspects of safety and environment sustainability cannot be risked or compromised. The essence, therefore, for any improvement should be on bringing about linearity in processes, with enhanced interdepartmental coordination, predictability and transparency. Speed will be critical. A study in the United States shows that accelerating permit approvals by three months in a 22-month project cycle could increase construction spending by 5.7 percent and property tax revenue by 16 percent20. At the same time, reducing manual interface should help in bringing down both official and non-official cost, which is another important factor.

Single window/One-stop permits shop
This model will facilitate the suggested process linearity and reduce current complexity leading to unacceptable delays. It will basically involve having all agencies or their representatives required for technical/administrative oversight in the process to be physically located in a single facility, often connected by a shared computer system. To this end, an overarching legislation will be required to establish oversight mechanism and to ensure coordination and information sharing. To the extent a single stop having both State and Centre units might be difficult to establish, single point application facilitation and processing centre should at least be setup in each district with personnel trained to assist the applicants in filing and to guide on the compliance requirements. Once verified and endorsed by these authorised fee-based facilitation services, the applications can be expected to be cleared by respective departments much faster minimising any wasteful back and forth.

According to the World Bank, ‘Today only 37 economies around the world have some kind of one-stop shop for construction permitting. Since 2009, 17 economies have successfully implemented one-stop shops for permit applications. In 2011 Taiwan, China established its first one-stop shop for construction permits and continues to improve its operations. By 2012 the number of procedures required to process permit applications had fallen from 25 to 11 and the time from 125 days to 94.” Russia also established a single window recently (2011) to facilitate all procedures related to land use. China recently centralised the processes for preconstruction approvals. Similarly, Burkina Faso in Africa opened a one-stop shop for construction permits in 2008, under a new regulation that merged 32 procedures into 15, reduced the time required from 226 days to 122 and cut the cost by 40 percent.

Capacity Building
Urban planning bodies often have semiskilled staff lacking the proficiency and the capacity to undertake the complex permit process. India will have to significantly invest in capacity building and training of its personnel to efficiently exercise technical and administrative regulation of the construction sector. This would involve setting up training institutes and course curriculums in construction safety, environment impact assessment etc. CUTS has recently concluded a study on impact assessment of environment and forest clearance laws in India and capacity building is one of the major recommendations. The study will be in the public domain soon.

Restraining Deficient Performance
Changing laws and procedures alone are insufficient to deal with the endemic delays. Currently deficient transparency and accountability mechanisms need to be strengthened and written down in law for improved service delivery. We need a bonus-malus (the return of performance related compensation upon the discovery of deficient performance) system21. The bonus will help cover the lost rents, while malus will help in fixing responsibility at the right levels. Certainly, this is easier said than done, but making an effort in this direction will result in incremental changes and, hopefully, a sustaining impact.

Construction Risk Grading
Not a lesson from partners in BRICS, but rational and worth considering. Since construction projects could significantly vary in their design complexity, use and location it is only rational to grade them for associated social, cultural, economic or environmental risks. The requirement for approval and clearances should, therefore, be accordingly calibrated; construction of a hospital or a multiplex cannot be compared with the construction of a two storey commercial warehouse. A rigorous yet differentiated construction permitting processes to consider buildings according to their risk level and location needs to be thought through. This is to say that uncomplicated or low-risk structures should need less documentation and approved much faster than more complex structures. Such an approach would also allow efficient use of scarce resources available with authorities. According to the doing business report of the WB, “Worldwide, the main criteria used to classify a construction project by its potential risk are based on the building’s use, location and size. Today 88 economies have a risk differentiated approach”.

2.3. Starting a Business (158)
Registering a company is often the first step towards starting a business and has benefits for the company as also for the economy. In order to maintain comparability, the WB Doing Business Report takes into all the procedures relating to registration of companies for a 100 percent domestically owned Limited Liability Company. Registered companies can avail of the legal and financial services provided in the country and also any subsidies and tax benefits provided by the government. The economy in turn benefits with enhanced revenue generating products and services as the number of registered companies increases. However, starting a business in India is not easy, beset with multitude of procedures that are often extremely time consuming involving different agencies and offices such as the Ministry of Corporate Affairs, Income Tax Department, Employees Provident Fund Organisation among others. Another major concern is dealing with red tape are the resultant time and cost over runs. The various reforms and big bang projects being proposed by the government will not be successful until these processes are streamlined and corruption removed from the system. Some of the issues plaguing this process are mentioned in the subsequent sections. However, it is important to note that the government has of late taken some initiatives to ease the processes, which will also be discussed. The government has recently drafted the Companies (Amendment) Bill 2014 to remove some of the hurdles faced by businesses in India, which has been passed by the Lok Sabha and awaits approval by the Rajya Sabha.

Cumbersome Procedures
A major cause of concern is the multiple procedures and separate registrations required. Often these involve dealing with different departments, which only intensifies the problem. A new business is required among other procedures, to separately register for a Tax Account Number (TAN), a Permanent Account Number (PAN) and also register to pay VAT. Some of these procedures could be combined with others or be done at one place to ease the process. Overall, there are on an average 12 procedures that a business must complete in order to have their business registered. Many countries have significantly lower number of procedures with many completing the processes within a day.

High paid-in minimum capital requirements
This is a major cause of concern for the process of registration as India has one of the highest paid-in minimum capital requirements. This signifies the share capital that must be deposited by the entrepreneurs prior to starting operations. The Companies Act 2013 mandated the declaration of minimum paid-up capital to the Registrar of Companies (RoC). This declaration is essential for obtaining a certificate for commencement of business. Additionally, the RoC also faces capacity constraints which can cause further delays. According to data, the number of companies registered in May-October, 2014 were 31,461, which is significantly lower as compared to the same period last year when it was 48, 63622. The high paid-up capital requirement in India is possibly creating an entry barrier for entrepreneurs.

High costs of registration
The cost of registration is another aspect, which is on the higher side for the country. India is at 98th place in terms of costs of registration and the most expensive in comparison to all BRICS countries.

Timely approvals not provided
Each of these procedures have a stipulated time frame associated with it, however, these are often not observed. There is poor accountability i.e. no penalties in place for delays in approval, which further exacerbates the situation. The absence of periodic capacity review may also result in delays in the processes.

Lack of Transparency
Another challenge is the lack of transparency in dealing with some of the government agencies for procedures and approvals. This often increases the time and costs involved for the entrepreneur along with increased probability of corruption. It further adds to the uncertainties associated with the process.

Red tape is now seen as a part and parcel of the systems in the country. Entrepreneurs have been known to face a high degree of corruption where favours have to be granted for assuring completion of procedures.

Differing requirements across cities
The procedures are not standardised across the country with different additional procedures required across cities. In the Doing Business 2015 report it is seen that the number of procedures differ in Mumbai (13) and Delhi (11), which can further add to the challenges faced by entrepreneurs.

Uncertainties associated with policies and regulations
The uncertainties associated with regulations and procedures can also create challenges for operations in India. According to the recent Doing Business 2015 rankings, India ranks 158 out of 189 countries on the ‘Starting a Business’ indicator. The ranking has declined in 2015 as compared to 156 in 2014. This indicator accounts for all the procedures formally required to start business operations along with the time and costs of these procedures. The paid-in minimum capital is another measure accounted for by this indicator. A comparison of this indicator across BRICS nations points that one of the most alarming aspects of registering a business is the high costs and paid-in-minimum capital involved. The paid-in-minimum capital, which is 111.2 percent of the income per capita in India is in stark contrast to almost ‘nil’ requirement in other countries. South Africa and Russian Federation fare better than India on all parameters tested, under the indicator. It takes round 12 procedures and approximately 28 days to register a business in India while the same are much lower in South Africa and Russian Federation. Even though Brazil and China are at par or worse off in comparison to India in terms of number of procedures and time taken, the costs and paid-in-minimum capital are significantly lower even in these countries. This is a major cause of concern for India.

Table 7: Starting a Business: Comparison across BRICS Countries
A comparison across Indian cities indicates that the procedures and number of days is marginally higher for Mumbai as compared to New Delhi. However, the costs involved are almost double in Mumbai. The paid-in minimum capital is similar in both cities (not in figure).

Figure 7: Registering a Business – Comparison across Indian Cities
Many countries have been undertaking reforms to make the process of starting a business easier. These reforms largely involve simplifying procedures, removing redundant processes and eliminating the paid-in minimum capital requirements. Easing the registration process leads to
more number of firms registering their business, which would mean a greater tax base, more opportunities to grow and for employment. Additionally, a greater proportion of unregistered firms would provide that many more opportunities for corruption.

Reforms to Assist Starting a Business: International Experience
The reforms made in the Russian Federation have resulted in a rise in the DTF from 82.2 in 2010 to 92.2 in 2015. The number of procedures has declined from 8 to 4.4 and the time taken dropped from 29 to 11.2 days in this five year period. China has improved its DTF from 62.67 in 2010 to 77.4 in 2015 mainly on account of reduction in costs and removing the aid-in minimum capital requirements from 130.9 percent in 2010.

As can be seen from the figure above, the DTF score for ‘Starting a Business’ has significantly improved for India and China, even for Brazil. Russia too has improved considerably and is the frontrunner within the BRICS group with a current DTF as high as 92.2; it has done away with couple of formal requirements both procedural and financial. While the score for Brazil has improved from 51.9 in 2009 to 63.4 in 2015, China’s score has increased to 77.4 in 2015 from 64.7 in 2012 during the period of reforms undertaken in the country. The two major reforms in Russia took place from 2014 and the DTF score improved from 85.0 in 2013 to 92.2 in 2015. South Africa undertook reforms in 2009 and 2012 and the DTF score improved from 81.2 prior to the reforms to 89.4 in 2015.

Global Best Practices
Bizfile, Singapore4: This is an online system that enables entrepreneurs to register their business on their own. It provides facilities of registration, filing with an information retrieval system, significantly reducing the time for registration. While earlier information on successful filing was updated within 14-21 days, now it takes only 30 minutes. In case approvals are required from other government agencies, this system emails the said department, which can then log on to Bizfile and retrieve the application for approval. The costs dropped to SGD 300, which earlier cost between SGD 1200- 35000 while the time taken to register reduced from 24 hours to 15 minutes.

Computerised Registrations, Mauritius23
The country began computerised registrations of companies in October 2006 which reduced the total registration time from 46 days to less than a week Mi Negocio, Guatemala5: Introduced in March 2013, it is an online system through which entrepreneurs can register with the Commercial Registrar, the Tax Authority, the Social Security Institute and the Ministry of Labor through the system. This helped reduce the number of procedures and time taken by more than half. Minimum capital requirement, Africa24: The Organisation for the Harmonisation of Business Law in Africa (OHADA) required the 17 Sub-Saharan African member countries to have a minimum capital requirement of at least 1million local currency units. This provision was removed in 2014 and as a result Benin, Côte d’Ivoire and Togo made significant reductions in their requirement. These 3 economies were among the top 20 improvers in the ease of starting a business in 2013/14.


Reducing/removing The Minimum Capital Requirements
Out of the 189 economies covered in the Doing Business Report, 104 economies do not have any minimum capital requirements. Only 18 countries have minimum capital requirements higher than India’s, thus indicating the need to reduce or completely remove this criterion. The impact of this parameter on the ease of starting a business has been acknowledged by the present government, which has proposed the removal of this requirement thorough the Companies (Amendment) Bill 201425.

Simplifying Procedures
The Government should focus on removing redundant procedures or combining procedures where possible. This would help save time and also reduce the number of visits to multiple departments that are currently required. Also, a combined application form would be helpful for the entrepreneur. Odisha has one common form accepted by all departments instead of the multiple forms for each department26.

When the procedures across India, Russian Federation and South Africa are compared, it is seen that many procedures in India could be combined to ease the process. In South Africa and Russian Federation, registrations for taxes and VAT are done in one step while in India we require multiple procedures for VAT, other taxes registration and payment, which could be combined to ease the processes. Thus, many of these can be removed or combined with other procedures for simplicity.

Moreover, the Government is also proposing to integrate the procedure elating to name availability, allotment DIN, company incorporation and commencement of business through a unified e-portal27. Also, the requirement of a certificate for commencement of business has been removed and the company presently has to inform the RoC through an
online procedure.28

According to the Doing Business Report 2015, close to 100 economies have some form of one-stop shop for registration of business. The process in countries with one-stop shops is more than twice as fast as countries without such systems29. In India too, this system has been successful in some states. However, the scope and scale of such systems need to be expanded. The MCA-21, which is an e-governance initiative by the Ministry of Corporate Affairs, aims to reduce the time taken for all procedures with the Ministry30. However, an entrepreneur would still need to complete the other procedures with the different departments. Thus, the need of hour is a single window mechanism, online or offline, through, which all formalities can be completed. Another initiative is the e-Biz portal, which acts as a one-stop shop for some of the registrations, clearances, licenses required. Recently, the Employees’ State Insurance Corporation of India (ESIC) processes have also been integrated within this portal31 and many more are also being included with time. However, all the processes necessary for starting a business should be moved online on a single platform. The forms should be easy to fill and there should be a provision of paying the necessary fees online itself. The applicant should also be able to track the progress of the applications and raise any grievances.

Increased Usage Of Technology
The use of technology, wherever possible, should be encouraged in order to simplify procedures and reduce the time and costs. Provision of online applications, approvals and payments should be initiated. The government is moving towards online approvals for more than 200 permits which could aid the process of starting a business. Tracking of status would be provided online and in time will also be available on mobile phones32. Increased use to technology and online systems will minimise interaction with public officials and thus reduce the chances of corruption.

Greater transparency in procedures across departments will also be helpful in combating corruption which remains a major limitation in most processes in the country including registering a business. Greater clarity and visibility will not only boost investor confidence, but will also reduce the unwarranted role of brokers or agents.

Reduce Cost
At present, the costs involved for starting a business (12 percent of per capita income) are high and need to be significantly brought down. As mentioned above, reducing and simplifying the procedures, and moving towards online system could help in reducing costs.

Timely Approvals
Another challenge is obtaining approvals in a time-bound manner. Greater usage of technology and online approvals could help the scenario. Additionally, deemed approvals could also be considered in cases where the authority delays the decision, the investor may consider the same approved and proceed. The government has identified bottlenecks and is working to reduce the time taken to register from the current 27 days to a single day33.

Single Unique ID
At present, a business needs to register separately for Tax Account Number (TAN), and Permanent Account Number (PAN). Instead one single unique ID could be generated and used for both.

Departmental Coordination
Currently, an entrepreneur has to visit multiple departments and comply with their varied procedures and requirements which is a major limitation. The government needs to adopt a business-centric approach as opposed to a department-centric one. Greater coordination and cooperation between departments would go a long way in simplifying the process.

Facilitation Cell
All the information regarding procedures, documentation requirement etc. should be available to entrepreneurs in one place. Thus, a facilitation cell which provides information, guidance and assistance with the procedures would be a positive step. The Government has taken some positive steps by creating Invest India, which is a joint venture between Federation of Indian Chambers of Commerce and Industry (FICCI) and Department of Industrial Policy and Promotion (DIPP). This agency is created for work towards investment promotion and facilitation for the global investment community. However, until the implementation is effective, the impact of this initiative on the overall ease of doing business will be limited.

Grievance Redress
This is another critical aspect which is essential to improve the business environment. A dedicated agency or team within the departments is essential to address entrepreneur concerns. As part of the Make in India initiative, an auto response mechanism will be available to address entrepreneur queries online within 24 hours. An eight member team of specialists is also proposed to provide solution to entrepreneurs within a stipulated time34. However, the impact and success of this initiative still remains to be seen.

2.4. Paying Taxes (156)
Taxes matter for the growth of any economy. Increasingly, it is seen across the globe that governments recognise tax as an important dimension of an economy’s competitiveness with an ability to help encourage domestic investment and attract inward investment. In addition, taxes also provide the sustainable funding needed for social programmes and cultivation of infrastructure to promote economic growth and development, and build a prosperous and orderly society.

Unfortunately, how rest of the world gazes India with respect to its taxation framework is neither soothing nor morale boosting at all. The consensus among the masses is that the Indian tax regime is not conducive to fostering growth. It would further not be incorrect to say that tax regime in India has so far followed what is internationally termed as ‘adversarial approach’ while the world is moving towards a ‘collaborative approach’ or ‘co-operative approach’. As a result, India fares poorly on the paying taxes indicator, under the ‘Doing Business 2015’ Report, as in the past years. Of the 189 countries studied, India ranks 156 in terms of overall ease in tax payment.

The Indian tax regime is characterised by high tax rates, massive build-up of tax disputes, arbitrary interpretations, multiple taxes and inadequate infrastructure to cope up with changing situations such as proposed Goods and Service Tax (GST) law and Direct Tax Law (DTC), etc. These issues make it excessively expensive for smaller and mid-sized firms to do business. Some of the key challenges/problems are highlighted below:

High Tax Rates
Each country fixes a particular tax rate depending upon various factors including a mix of historical baggage it carries, the current state of economy, funds required for socio-economic development, rates fixed by other competitor countries, etc. The tax rates in India are much higher, which consequently makes cost of doing business significantly excessive. For instance, a comparison of the corporate tax rate of India with that of other BRICS nations suggests that while the tax rate in India (33.99 percent at present) is comparable to that of Brazil (34 percent), it is still considerably high as compared to the tax rate of Russia (20 percent), China (25 percent) and South Africa (28 percent)35, which make all these countries favourable business destinations.

Massive Tax litigation
Unprecedented increase in litigation and long pendency of adjudicating proceedings dents the confidence of investors. The disputes arising at the assessment stage may take between 12 to 20 years before it attains finality at the Supreme Court level.36 However, in recent times, even this has not been seen as final, because of many instances of retrospective amendments which undo the impact of a court decision.

The dispute resolution infrastructure in India also suffers because of challenges like absence of reliable economic model capable of making meaningful revenue projections and budget targets of the Government, ‘Boxed-in’ approach (bunching of cases) adopted by the adjudicating authorities towards the end of the deadline takes a toll on the quality of the decision, arbitrary/irrational interpretations, etc.37

Chaotic Tax Regime
The way in which the tax system collects and administers its taxes has an impact on businesses in terms of the time required and the costs associated with that time. In the Indian scenario, the right to tax subjects is distributed between the Centre and the State Government in accordance with the Constitutional provisions. While the enumeration of taxation powers placed in the Union List comprises tax on income (other than agricultural income), excise duty, custom duty and service tax; the State List contains land revenue, tax on sale of goods (VAT), stamp duty, tax on motor vehicles and road transportation, tax on agricultural income, etc. Compliance with multiple tax requirements (with different authorities at the Centre and State level) and payment of copious taxes makes the entire framework cluttered, and eventually resulting in unhealthy business environment.

Transfer Pricing Controversies
With increase in FDI and cross border trade in the recent past, transfer pricing (TP) has been an area of focus both for multinational enterprises (MNEs) and the tax authorities due to direct linkage with revenue earning ability of both sides. The level of economic interest of both MNEs and tax administration in cross-border intercompany transactions, developing and growing phase of the economy and nascent TP regulations in India have led to increased tax controversies in the country.

The business world has seen tax controversies in TP moving up from computational errors in arithmetical margins, selection of the most appropriate TP methods, selection of comparables, marketing intangibles, management cross charges, royalty payments, and allocation to profits to permanent establishments (PE), etc. All these issues put India on the backseat in terms of inviting the world to business in the country.

However, such controversies and huge stakes involved therein have also brought along a more matured tax litigation regime with the introduction of Dispute Resolution Panel (DRP) mechanism, Advance Pricing Agreements (APAs) and Safe Harbour Provisions. Very recently, the Government has decided not to challenge Bombay High Court ruling in Vodafone TP matter, to convey a clear and positive message to investors globally that its litigations would be “fair, transparent and within the four corners of law”.39

Inadequate Technological Infrastructure
India is currently in the phase of revolutionary changes in information technology, which also gives a great advancement in e-filing field of the tax department. There is a lump sum 9.6 percent increase in e-filing from financial year 2007-08 to 2013-14. However, this growth is quite restricted. According to the Central Board of Direct Taxes (CBDT), around 82 lakh returns were e-filed till July 29, 2013, which makes around 40 percent of the returns e-filed during the same period last year40. Also, scrutiny assessments are presently being done in physical mode despite the fact that the selection of the scrutiny cases is random and computer based. Further, many states are still not able to implement passable online system for paying state taxes and filing returns.

Poor Drafting
According to a recent report submitted by the Tax Administration Reform Commission (TARC)41, many provisions in Indian tax laws suffer from poor drafting and are amendable to multiple interpretations. Further, stakeholder participation in the drafting stage is also close to non-existent. Certain crucial amendments to tax laws are passed along with the budget without any public debate in the name of confidentiality (Budget being a confidential exercise). An ex-ante impact assessment (IA)42 of the legislations, which provide for participatory approach at the time of law making and legal drafting, to assess the impact of legislations and egulations on relevant stakeholders could help in regaining confidence from rest of the world to look towards India as a business friendly destination.

The ‘Doing Business’ ranking exercise records the taxes and mandatory contributions that a medium size company must pay in a given year and also measures the administrative burden of paying taxes and contributions. It measures the ease of paying taxes using the following three sub-indicators:

Total Tax Rate is the measure of tax cost the total of all taxes borne as a percentage of commercial profit43, The time to comply – this captures the time required to prepare, file and pay different taxes, and The number of payments – the frequency with which the company has to file and pay different types of taxes and contributions, adjusted for the manner in which those filings and payments are made.

On most of these measures, India’s position compared to other countries is not promising. Below is the comparative analysis of rankings and broad parameters with respect to ‘Paying Taxes’ across BRICS countries.

The number of tax payments is significantly high in case of India vis-à-vis rest of the BRICS nations. India is the only country across BRICS wherein the number of tax payments in a year is in double digits (33).

With respect to time to prepare, file and pay taxes in India, it is comparable or even better than Brazil and China, but still considerably high as compared to Russia and South Africa. Last but not the least, total tax rate is again significantly high in India, though lower than Brazil and China.

Comparing it with tax rate prevailing in South Africa (28.8 percent), it is more than double in case of India (61.7 percent).

Reforms on Paying Taxes: International Experience
Many countries have been undertaking reforms to make the ease of paying taxes. The most common feature of tax reforms in the past year was the introduction or enhancement of electronic systems for filing and paying taxes. Reduction in the profit tax rates is the second most common feature of tax reforms. The timeline below traces some of the tax reforms taken by the BRICS nations through the last many years. The reforms made in tax areas have shown substantial benefits to all countries including BRICS nations.

Thus, it can be deduced from the above that while Brazil showed a range bound DTF (40.74-43.32) from the year 2006-15, China, Russia and South Africa pursued a much steeper trajectory. China’s climb has been the most impressive with particular upsurge in 2009 (from 18.5 in 2008 to 46 in 2009) when it reduced the corporate tax rate and improved upon accounting
methods. China has been on a growth trajectory ever since, though not as sharp, reaching a respectable 67.4 by 2015.

Similarly, there has been noticeable increase in DTF in case of Russia and South Africa as well subsequent to the periods when major tax reforms took place in these respective countries. Interestingly, India has also shown encouraging progress, with DTF increasing from 39.4 in 2006 to above 55 by 2015; significant improvement is noted between 2011 and 2012. However, India is still just about halfway distance to frontier and needs to bring about significant reforms in payment of taxes.


Reduce Tax Rates
To make India an attractive business destination, it should consider reviewing and lowering the tax rates in the phased manner. Presently, there are different tax rates for resident entities and non-resident entities under the Indian Income Tax Law. While foreign entities (corporates, firm, Limited Liability Partnership (LLP), etc.) are liable to be taxed at the rate of 40 percent, resident entities are taxed at the rate of 30 percent. The applicable for non-resident entities could be reduced to 30 percent in line with the tax rate applicable for Indian resident entities. Likewise, the Government could also consider doing away with surcharge and cess, which could reduce the marginal rate of tax substantially. This would encourage foreign entities to consider India as an important business hub and this would also be in conformity with Prime Minister Narendra Modi’s call to companies to his ambitious ‘Make in India’campaign! 44 However, such changes should be made only after undertaking a proper cost-benefit analysis (CBA).

Structural Reforms
A progressive tax regime can lead to efficient resource allocation and provide a fillip to manufacturing. This includes reduction in the number of levies and simplification of their nature. In this regard, GST is one of the immediate recourse which should be implemented without any delay as it could address the existing indirect tax system like tax cascading complexity and poor infrastructure along with high cost of compliance. According to National Council of Applied Economic Reseach (NCAER), comprehensive rollout of the GST alone can lead to 0.9-1.7 percent increase in GDP and 3.2-6.3 percent y-o-y gains in exports. Similarly, reoriented Direct Tax Code (DTC) would also help in strengthening the tax framework in India, once implemented comprehensively

Time-bound Dispute Resolution
Steps to create a transparent dispute resolution mechanism like e-courts can substantially improve investor sentiment. The adjudicating officer can issue a notice electronically specifying the issues/ queries and asking the tax payer to submit reply with evidences via electronic mode only. Also, retrospective application of tax laws must be avoided and advance ruling mechanism for cross-border transactions should be strengthened to assure investors.

Improved Technological Infrastructure
Paying taxes should be made easier for companies by enhancing the electronic system for filing and paying. E-payment and e-filing should be made mandatory for all categories of assesses/ taxpayers. In this regard, the Government should ensure that all the taxpayers should be made aware about the benefits of online payments and filings. Also, capacity building programmes should be organised for the tax department to equip them with the capacity to handle technological issues, if any.

Transparent Public System
To bring about transparency in the public system draft amendments along with the purpose of such amendments, should be kept open for public comments and rationale should be given for acceptance or rejection of the same. Also, certain crucial amendments to the tax laws other than the tax rates should be delinked from the Budget exercise48. In addition, a system of periodic review of utility of existing statutory provisions must be institutionalised.

Comprehensive General Anti-avoidance Agreement (GAAR)
The tax regime in India also needs operational reforms by laying emphasis on getting the tax base right and ushering in certainty and stability. In this regard, there is a need for comprehensive General Anti-avoidance Agreement (GAAR) involving grandfathering of investments made prior to April, 2015.49

Lessons From Home
There are lessons available closer home as well. Certain states in India have made notable reforms in providing an easier to-do business experience than the others. A record of such in-house improvements, which could be more easily absorbed and replicated in the select weak areas discussed above, is made here.

The discussion on the four weakest considered elements of business regulatory environment in India is essentially to contribute to the discourse and to assist India to focus on specific areas as it charts its course towards the desired doing business rank of 50 in next two years.

To Conclude
While it may be difficult to argue on a particular rank for India to achieve in the short term, a guided movement along workable reforms or good practices in its weakest ranked areas can be attempted to advance it towards the frontier. To this end, a comparative statement on DTF for BRICS is presented below, with India expected to move at least close to the next best DTF score on each of the indicator.

About CIRC
CUTS Institute for Regulation & Competition (CIRC) was established in 2008 by CUTS International ( With the mission to be a Centre of Excellence on Regulatory and Competition Issues, CIRC primarily focuses on economic regulation in infrastructure sectors, and competition policy and law with an objective of reaching out to the target audience in India and other developing countries in Asia and Africa. Its crucial role in research and capacity building in the area of competition policy and law and regulatory reforms has created an intellectual knowledge base. This rich experience of working on regulatory issues and competition policy and law has resulted in many national and international publications which has enriched a more informed discourse on public policies and greatly benefited different stakeholders in the society. Since its inception, CIRC has been undertaking several trainings, seminars and public lectures on competition policy and law in India and aboad. It also organises international symposia on the political economy of competition and regulation in the developing world and India.

CIRC offers practical focus on educational and training programmes on economic regulation, and competition policy and law. The Institute aims to facilitate research to enhance understanding and explore inter-disciplinary linkages among the identified subjects. Increasing demand of long and short-term courses offered by CIRC is appreciated by many national and international organisations.

The Institute has also made cerebral contribution in the work of the High Level Committee on National Competition Policy