Tuesday 19th November 2019

    Ease of Doing Business in India: Taking Steps beyond Policy Initiatives

    India's rank in World Bank's Report, Doing Business 2018: Reforming to Create Jobs, has moved up to 100 as compared to 130 in the previous year. This massive jump in the ranking – highest ever recorded – is the result of reforms undertaken in the last four years in nearly thirty seven area covered under the indicators of starting a business, dealing with construction permits, getting credit, protecting minority investors, paying taxes, enforcing contracts and resolving insolvency. India has also been categorised among the top 10 improvers of 2018. Read On...

    One of the most crucial indicators for business is ‘Trading across Borders’ (TAB) wherein the time and cost required to release the cargo from the customs port in Delhi and Mumbai is captured through a questionnaire which relies on the perception of the traders and trading agents. Here, India’s position has slipped by 3 places, currently at 146 out of 190 economies. A 10-spot jump in this indicator was expected in consonance with the central government’s initiatives in recent times, such as Make in India, Digital India and formation of the inter-ministerial committee on Ease of Doing Business. These measures were in conformity with India’s ratification of WTO’s Trade Facilitation Agreement in April, 2016, and of the SAFE framework of standards of the World Customs Organisation (WCO). However, the current ranking does not seems to reflect the impact of these initiatives as they have not been able to change the stakeholder perception.

    A number of reasons are attributed to this. Firstly, various stakeholders play a role in TAB including the terminal operator at the port, customs, custodians such the container freight stations or inland container depot, the shipping lines and the trader. The delay accounted for in release of cargo may be due to deferral by one particular stakeholder, which has an impact on the overall release time. For instance, the customs may timely grant ‘Out-of-charge’ (release order) to a consignment, but the shipping line may delay the issue of delivery order, without which the custodian cannot release the cargo. Secondly, there is gap between the perception of the traders and that of the authorities. For instance, despite digitisation, various documents were being completed in the physical form instead of being electronically facilitated – until recently, the terminal operators collected physical copies of the documents such as the OOC, delivery order, and proof of payment of Maharashtra state stamp duty to release the direct delivery imports. So, while electronic clearance of the consignment would be taking place in a shorter span of time, the actual release would happen only after production of physical copies, adding to the transaction time and cost. Thus, the policy on paper is not mirrored at the ground level, which creates a mismatch between the perception of the authorities and the traders.

    Several measures have been taken by the GOI to reduce the dwell time and cost for EXIM trade through the Jawaharlal Nehru Port. This includes reduction in the number of containers being assessed, increase in direct delivery at ports, digitisation of processes such as implementation of the RFID system at the port terminal gates and the testing processes, as well as amendments in the Customs Act 1962 with respect to filing Bill of Entry and duty payment, in order to improve ease of doing business in the country. Apart from this, the Jawaharlal Nehru Customs House (JNCH), Federation of Indian Exporters Organisation (FIEO) and Bureau of Research on Industry and Economic Fundamentals (BRIEF) conduct independent time release studies to map and assess the average time taken by a container to be released from the port and customs. While the numbers show improvement (the Customs Release time has come down to from 40 hours in October 2016 to 25 hours in October 2017), the perception on the ground does not completely reflect these changes because either the stakeholders/users lack awareness about the reforms or the stakeholders are not compliant despite initiation of the reforms.

    Prime Minister Narendra Modi wants India to fall in the rank of top 50 countries in Ease of Doing Business. For this to take place, the government needs to complement its monitoring of policy and infrastructural reforms with extensive outreach programmes to relevant stakeholders in order to bring about a positive change in the perception among stakeholders for the key developments being pursued by the authorities. In this pursuit, trade associations such as the Customs Brokers’ Association, and Federation of Freight Forwarders Association of India (FFFAI) are important stakeholders who can act as a bridge between the GOI and the trade fraternity. Continuous interface with members of such associations will make sure that the trading agents are aware about the most recent reforms and they share the same information with the businessmen. These measures, in addition to the ones being undertaken by the government, will certainly create a positive environment for Trading across Borders in India.

    - Riya Sinha and Akhtar Malik (TradeBriefs Bureau)

    Views expressed are personal. Riya Sinha and Akhtar Malik are Researchers at Bureau of Research on Industry and Economic Fundamentals.

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