World Bank’s Ease of Doing Business Index:
World bank’s ease of doing business index is a comprehensive parameter that judges the countries on various parameters and provide every businessman, entrepreneur and investors the perspective that how easy is to do business in that country. This is a report that ranks countries across the world based on how easy or difficult it is to do business there. This index is a big matter for India, because our government is working hard to improve its ranking in it. So let’s understand it in detail – what is it, how does it work, what is India’s role in it, and what is its future now?
What is the Ease of Doing Business Index?
The Ease of Doing Business (EoDB) Index was an annual report started by the World Bank in 2003. Its idea was to measure the business environment of every country – how easy or complicated it is to start, run and close a business there. This index ranked 190 countries, from 1 to 190, where 1 means the best (business-friendly) and 190 means the toughest.
This report focused on 10 key areas:
Starting a Business: How easy it is to register a business.
Dealing with Construction Permits: Process of building permits.
Getting Electricity: How quickly does one get electricity connection.
Registering Property: Property transfer system.
Getting Credit: How easy it is to take a loan.
Protecting Minority Investors: Rights of small shareholders.
Paying Taxes: How easy is the tax system.
Trading Across Borders: Process of import-export.
Enforcing Contracts: Resolving legal disputes.
Resolving Insolvency: Recovery after a business closes.
Scores were obtained in each area, and an overall rank was made by averaging them. The lower the number, the better the rank – it is a simple matter!
Why was this index started?
The World Bank’s motive was to compare countries’ business rules and motivate them to improve their systems. This idea was developed by economists Simeon Djankov, Michael Klein, and Caralee McLiesh after the World Development Report 2002. They said that if rules were simple and property rights were strong, economic growth would increase.
This report was like a report card for governments – if you rank well, investors will think it is safe and profitable to do business here. For developing countries like India, this was a chance to showcase their reforms to the world.
India’s Journey in Ease of Doing Business
Now let’s talk about India’s journey. When this index was launched, India’s rank was quite low – in 2014 we were at 142nd position. Seeing this, Modi government started a mission – to boost “Make in India” and “Ease of Doing Business”. The target was to bring India in the top 50.
What was done?
Starting a Business: Company registration was made online and fast – SPICe (Simplified Proforma for Incorporating Company Electronically) was launched.
Construction Permits: Procedures and time for permits were reduced, especially in Delhi and Mumbai.
Getting Electricity: Time for electricity connection was reduced from 137 days to 53 days.
Paying Taxes: GST was introduced to unite multiple taxes.
Trading Across Borders: Electronic systems and e-sealing started at ports.
Insolvency: Insolvency and Bankruptcy Code (IBC) 2016 made business closure systematic.
The result of these reforms was that India’s rank improved rapidly:
2016: 130th
2018: 100th (30 spot jump!)
2019: 77th
2020: 63rd
This jump was a very proud moment – India remained in the top 10 reformers for 3 years. The World Bank also said that India made a lot of progress in simplifying the rules.
How was this index created?
It is important to understand how these rankings were made. The World Bank focused on the largest business city in each country – Delhi and Mumbai in the case of India. Data was collected from:
Laws and Regulations: A study of local laws.
Surveys: Questionnaires from lawyers, accountants, and business owners.
Time and Cost: How much time and money each process takes.
For example – if it takes 5 processes and 10 days to start a business in Delhi, its score was calculated. Each indicator had a “Distance to Frontier” (DTF) score – this showed how far you were from the best practices. Then the average of all the scores was calculated and the ranking was given.
Success Stories and Criticism
Success Stories:
Poland: Became top reformer in 2012, with 4 reforms – property registration, tax payment, contracts, and insolvency.
Georgia: At one time reached rank 8, due to simple rules.
India: Jumped 79 spots from 2014 to 2019 – jumped from 184th to 27th rank in construction permits.
Criticism:
But this index was not perfect. Critics raised many questions:
Data Accuracy: Relying on surveys was risky.
One-Size-Fits-All: Same parameters for every country, local conditions were ignored.
Gaming the System: Countries did reforms only to improve ranks, not focus on real impact.
Controversy and Discontinuation
A big twist came in 2021 – World Bank discontinued the Ease of Doing Business report. Why? Data manipulation scandal! In June 2020, internal audits showed that there were irregularities in the 2018 and 2020 reports:
China: Pressure was put to improve ranks.
Saudi Arabia, UAE: Data was manipulated.
Azerbaijan: Scores were artificially increased.
These allegations were levelled against senior officials, such as ex-World Bank President Jim Yong Kim and IMF chief Kristalina Georgieva. Investigations confirmed that bank leadership had pressured experts to change the rankings. In September 2021, the World Bank said – “Now this report is closed!” Trust was lost, and credibility was difficult to restore.
Its Impact on India
It was a mixed bag for India. On the one hand, we did reforms because of this index – the business environment really improved. Steps like registering companies, GST, and IBC are good for long-term growth. But on the other hand, the pressure to improve the rankings sometimes got diverted to superficial reforms – real ground-level changes were less.
Example: Delhi has got fast electricity connection, but people still wait in villages. So the rank has gone up, but the real impact has not reached the whole country.
World Bank’s New Plan – Business Ready (B-READY)
After the Ease of Doing Business was closed, the World Bank started a new project – Business Ready (B-READY). This methodology was released in 2023 and reports will start coming from 2024. What is different in this?
Broader Scope: Not just rules, but public services (roads, utilities) will also be covered along with the business environment.
Less Ranking Focus: Less on competitive ranking, more focus on improvement.
Transparency: Data collection and scoring will be kept open.
10 Topics: Business entry, location, utilities, labour, financial services, trade, taxation, dispute resolution, competition, insolvency.
The idea behind B-READY is to reduce the chance for countries to “game” and to measure real progress. India is also taking an active part in this – the government has started preparations in April 2024.
India’s Future in B-READY
B-READY is a new opportunity for India. Our reforms – such as GST, Digital India, and MSME support – can shine in this. But there is work left in some areas:
Labor Laws: Implementation of new labour codes.
Dispute Resolution: Reforms to resolve cases quickly in courts.
Rural Reach: Benefits to reach small towns and villages.
If we focus on these, we can be among the top performers even in B-Ready.
Lessons of Ease of Doing Business
What did we learn from this index?
Reforms Matter: Simple rules boost business growth.
Transparency is Important: Data should be trusted.
Local Context: One formula does not work everywhere.
Real Impact: Ground-level change is more important than rank.
India has learnt from this that the focus of reforms should not be just on rank, but on real progress. For example, GST simplified the tax system, but rural traders still need training.
Global Examples
New Zealand: Always on top – simple company registration (in 1 day), strong property rights.
Singapore: Tax system and trade processes are world-class.
Georgia: Rank rose from 112 to 8 – due to digital reforms.
India can take inspiration from these, but will also have to keep its unique challenges – population, diversity – in mind.
Conclusion: A New Beginning
Friends, the World Bank’s Ease of Doing Business Index was a chapter that lasted 18 years and taught us a lot. It was a motivation for India to improve its systems, and we proved that when there is will, change is possible. But now a new era is starting with B-READY, and we have to give our best in this too.
This index was not just a game of numbers – it was a way to create a business-friendly environment. So if you are an entrepreneur or run a business, understand that the government is working for you. Talk to your local MLA, bank, or MSME office, take advantage of the reforms, and grow your business. If you liked this blog, share it with your friends, and share your thoughts in the comments. Ease of doing business has not stopped yet – it has just started! Happy growing!