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Repeated appeals a roadblock to doing biz in India: World Bank

business Updated: Aug 01, 2016 13:48 IST
Mahua Venkatesh
World Bank

World Bank country director for India Onno Ruhl.

At a time when a team from World Bank is conducting its survey on the Ease of Doing Business in India, country director Onno Ruhl told HT that lawsuits and repeated appeals are proving to be roadblocks for businesses here.

One of the key concerns is the societal behaviour related to lawsuits.

“Repeated appeals are not encouraging…they prove to be costly for businesses and this is a knotty issue in India, which needs to be addressed,” he said. “In India, the typical reaction is to appeal to higher courts if you lose in the first instance, and the irony is that in 98% cases the outcomes have been upheld.”

“The government and the judicial system in India are very alive to the problem of time-consuming and costly litigation process in the country. There is a lot of emphasis being given to address this through the process of courts and also through alternate dispute resolution. The CII has been working very actively in this space,” said Chandrajit Banerjee, director general of Confederation of Indian Industry (CII).

The bankruptcy code — approved by Parliament in May—will, however, have a significant impact on this year’s much-awaited survey. With the critical legislation coming into effect, India’s rank in the survey is expected to move up .

While the government has taken several steps to boost investment and simplify procedures, a lot would also depend on the level of awareness on the ground, said Ruhl.

The Insolvency and Bankruptcy Code 2016 has replaced a string of archaic legislations with a modern contemporary law, and helps companies to opt for easy exits.

The passage of the bill was cheered by industry. “It will structurally strengthen the identification and resolution of insolvencies in India...the code will also significantly improve India’s ease of doing business ranking,” ratings agency Crisil had said after both Houses of Parliament passed the bill.

India ranks 130 out of 189 countries according to the Doing Business report for 2016, a rise of four positions over 2015. In South Asia, India lags Bhutan (71), Nepal (99), Sri Lanka (107) and Maldives (128). Neighbour China ranks 84th.

The team conducting the survey will soon hold meetings with government officials.

“We will have talks with them (World Bank officials) to explain the measures undertaken and the ground reality…things have changed and this needs to be noted,” a senior government official said.

“My take is that there has been significant progress and they (authorities) are working very hard, but at the same time, the process is complex, so we will have to wait,” Ruhl said.

130 India’s rank on the Ease of Doing Business index in 2016, up
four places from 2015

  • The World Bank uses a 10-parameter methodology to evaluate the ease of doing business in a country
  • The parameters include: Starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting minority rights; paying taxes; cross-border trades; enforcing contracts, resolving insolvency
  • WB conducts surveys across 189 countries with over 10,000 respondents in each country. The responses form the basis of the doing business parameters
  • Since resolving insolvency is one of the parameters, the enactment of bankruptcy bill is likely to boost India’s rank