Sumita Kale

Oct 21, 2019
4 min read

India’s global ranking in Ease of Doing Business has risen from 142 to 77 over the last five years and is set to improve significantly this year.

Ahead of the October 24th release of Doing Business 2020, this blog post explains in brief the methodology behind the Ease of Doing Business Rank. This annual exercise by the World Bank looks at 41 indicators across 10 topics to set up an objective measures of business regulations for local firms in 190 economies. Each country gets a score for each indicator that reflects the gap between its performance and the best practices in that indicator. The ten topics that are covered are as follows:

  1. Starting a Business: the time, cost, paid-in minimum capital and number of procedures to get a local limited liability company up and running

  2. Dealing with Construction Permits: all procedures required for a business in the construction industry to build a warehouse along with the time and cost to complete each procedure. Further, this topic also includes the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements.

  3. Getting Electricity: all procedures required for a business to obtain a permanent electricity connection and supply for a standardized warehouse, the reliability of supply and transparency of tariffs index and the price of electricity.

  4. Registering Property: the full sequence of procedures necessary for a business (the buyer) to purchase a property from another business (the seller) and to transfer the property title to the buyer’s name so that the buyer can use the property for expanding its business, use the property as collateral in taking new loans or, if necessary, sell the property to another business, the time and cost to complete each of these procedures and the quality of the land administration system in each economy.

  5. Getting Credit: the legal rights of borrowers and lenders with respect to secured transactions through one set of indicators and the reporting of credit information through another. The first measures whether certain features that facilitate lending exist within the appli­cable collateral and bankruptcy laws. The second measures the coverage, scope and accessibility of credit information available through credit reporting service providers such as credit bureaus or credit.

  6. Protecting Minority Investors: measures the protection of minority investors from conflicts of interest through one set of indicators and shareholders’ rights in corporate gover­nance through another. The data come from a question­naire administered to corporate and securities lawyers and are based on securities regulations, company laws, civil procedure codes and court rules of evidence

  7. Paying Taxes: the taxes and mandatory contributions that a medium- size company must pay in a given year, measures of the administrative burden of paying taxes and contributions and complying with post-filing procedures that includes the time and cost involved.

  8. Trading Across Borders: the time and cost associated with the logistical process of exporting and importing goods, covering documentary compliance, border compliance and domestic transport within the overall process of exporting or importing a ship­ment of goods.

  9. Enforcing Contracts: the time and cost for resolving a commercial dispute through a local first-instance court and the quality of judicial processes index

  10. Resolving Insolvency: the time, cost and outcome of insolvency proceed­ings involving domestic entities as well as the strength of the legal framework applicable to judicial liquidation and reorganization proceedings.

In addition to these ten topics, Labor Market Regulation is also measured, though this does not form a part of the aggregate ranking. This includes the flexibility of regulation of employment, specifically as it relates to the areas of hiring, working hours and redundancy, and other aspects of job quality such as the availability of maternity leave, paid sick leave and the equal treatment of men and women at the workplace.

CAVEAT: The World Bank stresses that the Doing Business study does not measure all aspects of the business environment that matter to firms or investors, nor does it cover all factors that affect competitiveness. Thus, important aspects like macroeconomic stability, corruption, labour skills, quality of institutions and infrastructure, strength of the financial system are not covered in the analysis. The focus is on the 11 topics, described above, with a sole specific aim of measuring the regulation and red tape relevant to the life cycle of a domestic small to medium-size firm.