Doing Business in India 2018 Report (The UK Perspective)

This report, based on responses from companies representing a combined turnover of over USD 122 billion, marks the fourth annual study on ‘Doing Business in India’ by the UK India Business Council (UKIBC) and will be the last prior to India’s General Election in 2019. Launched at the start of Narendra Modi’s term in office, we have been able to track if and how his commitment in 2014 to give investors ‘a red carpet, not red tape’, has come to fruition.

Last year, India made an unprecedented 30-place jump in the World Bank’s Ease of Doing Business (EODB) rankings, from 130 to 100. This year it has improved another 23 places, to rank 77th in the world.It is fair to say that India is coming on leaps and bounds in its reported ability to do business, but does this accurately reflect the reality on the ground?

India is a large and fast-growing market – its GDP is predicted to grow 6.7% in 2017-18. With a fast-growing aspirational consuming class, and 50% of its growing population below the age of 25, India’s growth is being driven by domestic demand. The current surge in consumer spending, which The Boston Consulting Group predicts will increase to US$3.6 trillion by 2020, is underpinning India as an investment destination.

And yet, India remains a complicated market with a federal system of 29 States and a multiplicity of regulatory, tax, social, and linguistic differences. While the majority of indirect and direct taxes are centrally controlled, there are worries that States are not making the most of changes to the tax regime to increase their competitiveness. This has prompted the UKIBC to include three new questions in this year’s survey, specifically designed to understand how the ease of doing business breaks down at the State level.

Understanding India’s digital push will be a vital window into future development. Drives to digitalise Government interactions mean 93% of all Indians now pay tax online, resulting in an impressive 80% jump in tax returns filed in the last 12 months. Plans to establish the largest health insurance scheme in the world, Ayushman Bharat, are set to be totally digital. At the same time the roll out of the Aadhaar biometric identity card to 1.1 billion citizens is rapidly making India one of the most data-rich countries in the world.

Attention increasingly needs to be turned to maximising digital platforms to ease doing business, whilst ensuring high standards of data protection are in place. For these reasons, the UKIBC has included measures of ‘Digital Innovation’ for the first time in this year’s survey questions.

More than those from any other country, UK businesses are increasingly investing in India. Since 2000, the UK has been the largest G20 investor in India, investing £17.5 billion and creating 371,000 new jobs, representing 10% of all FDI-related jobs in that period. British companies in India now employ almost 800,000 people, representing an impressive 1 in 20 jobs in India’s organised private sector.

Monitoring progress on the Ease of Doing Business in India is therefore important not only for UK businesses, but also for India’s wider economy. On the eve of India’s general election and the UK’s exit from the European Union, this report could not be more timely in shedding light on the operational attractiveness of the key growth economy of the 21st century and potential future of business-led, UK-India trade and investment relations.

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