Here's What India's Rise in Ease of Doing Business Ranking Means to Corporates, Start-ups & SMEs
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For the questions that had popped up regarding the Modi Government’s capabilities to revive the Indian economy, there was only one rebuttal on Monday. India had jumped up 30 ranks in the World Bank’s Doing Business report, and now holds the 100th position. From being lauded by followers and opposition (well, at least some of them) alike to trending on Twitter, ease of doing business occupied a larger part of the primetime news on Indian television.
Prime Minister Narendra Modi went on to LinkedIn to share a post about the ranking. He wrote, “India has improved its rank in 6 out of 10 indicators and has moved closer to international best practices. Furthermore, India is the only South Asian country and BRICS nation to feature among most improved economies.”
The World Bank report, which released the rankings states that the same were decided based upon parameters like — faster to start business, reduction in procedures and time involved in obtaining a building permit, easier access to credit, protecting minority investors, ease of paying taxes, trading across borders, enforcing contracts and easier resolution of insolvency.
Entrepreneur India spoke to people from three different segments, corporates, SMEs and start-ups, to get a ground report on whether they are aligned with the belief that the times are definitely changing.
Corporates: On the Right Path but a Long Way To Go
The Narendra Modi Government has introduced various reforms that have transformed the way we do business in India. With the higher ranking, corporates are obviously rejoicing. Alok Sanghi, Director, Sanghi Industries Ltd., believes that the efforts undertaken by the current government is finally apparent in these reports. “Faster building permit, access to credit, new insolvency rules business tax norms are some of the reforms that are visible from a businessman’s perspective. Since introduction of GST has not been considered this year, we believe the same would further give fillip to the ranking,” said Sanghi.
But the expectations from the government only get higher now. Leaders in the industry believe that India still has a long way to go in moving up the ladder. Sanghi believes that given the government’s focus on start-ups, there are more reforms required in starting a business, contract enforcement, simpler business exit rules and construction permits, where India has a lower rank. “Apart from these parameters, government should also focus to improving rank Index of Economic Freedom and Corruption Perception Index for a broader understanding on business environment,” he said.
Other corporate leaders, too, agree with Sanghi. With the government’s next target being to jump 50 positions in the list, there are many more things that the government needs to do. GST has not been considered in the current ranking (as the cut off date for rankings was June 1) and that too will help India’s ranking next year.
Kiran Deshpande, Co-Founder, Mojo Networks and Charter Member & President - TiE Pune, believes that post the enforcement of the Goods and Services Tax (GST) this year, tariffs have been streamlined and it has become simple to do business across the country. “However, we should target to be in top 20 and then top 10 in the next 3 – 5 years to make a real difference globally. In order to ace to the top position, Government, as a customer, has to seriously loosen up with administrative reforms and create an environment that accelerates startups,” said Deshpande.
SME: This is the Dawning of ‘Achche Din’
In his LinkedIn post, Modi even wrote, “This historic jump in ‘Ease of Doing Business’ rankings is the outcome of all-round & multi-sectoral reform push of Team India. An easier business environment is leading to historic opportunities for our entrepreneurs, particularly MSME sector & bringing more prosperity.”
With demonetization and GST, government has revised its focus towards the SME and MSME sector. Alok Mittal, CEO & Co-founder, Indifi Technologies, believes that so far, SMEs have always been constrained for resources and the easing up of the process of doing business helps them focus on their core growth. "Initiatives such as simplification of taxes and compliance help reduce the overhead of running a small business," he said.
Like Mittal, other players in the industry too believe that this is the proof of “achche din” for them. While they have already started seeing results on ground, the SME sector is hopeful for more reforms that will transform the way they function, said Asish Mohapatra, CEO & Co-founder, OfBusiness. Mohapatra also said that the functioning has become more transparent when it comes to obtaining permits and licences along with a distinct change in the behaviour of officials.
The SME sector is also looking forward to the possibility of a more robust and better framework in the near future.
"The business environment has certainly improved for the SME sector in last few years. Thanks to a huge list of reforms, favourable policy infrastructure, conducive investment environment and more focused approach of the government to create newer growth avenues for Indian SMEs,” said Anand Tandon, founder, Myforexeye.
India’s SME and MSME sector accounts for more than 80 per cent of the total industrial enterprises and thus, holds huge potential to become an important source of employment and entrepreneurship. “Easy access to innovative technology and SME funding for initial and scale up investments will certainly help in further boosting the Indian SME sector and will support India's dream to achieve the desired ranking," said Tandon.
Start-ups: International Partnerships and Recognitions Will Make their Way into India
The government’s focus on start-ups is at an all-time high with them favouring and promoting many start-ups in India. The government is also encouraging global start-up events to make inroads into the Indian ecosystem which has further boosted the number of partnerships taking place between Indian and international start-ups. For Akshay Chaturvedi, co-founder of edutech start-up Leverage where they have customers and partners across borders, the steep rise in the ranking is a huge boost.
“It adds immense value in all our US/Middle-East/China conversations. Customer sentiment improves, because this directly relates to perception on employability. Partners look at us favourably, with a relief 'that focus will be only on maximising impact' without any red tape/regulatory hassle,” said Chaturvedi.
While it has made an impact for many start-up founders, many others believe that it is only now that the effect will be noticed in the start-up ecosystem. Abhay Sharma, founder of Gaming Monk, is one of the believers that ease of doing business in India hasn’t changed as much as it could have in the past year and there’s still a huge need for reforms especially in the credit department.
“For a start-up to get a credit is difficult. It takes too many days even inside the Start-up India program, for a loan to be approved. Many start-ups are preferring incubators and angel investors in this case,” said Sharma.
According to him, automation is lacking in many of the business processes, and manual intervention will cost you something over the top in just convincing an officer in the middle. “Probably we will see the effects in the coming months. But the changes right now might have not affected anyone to a great extent,” he said.