Targeting Ease of Doing Business

in India
06
CHAPTER

“The King (i.e., the State) shall promote trade and commerce by setting up
trade routes by land and by water, and establishing market towns and ports” –
Kautilya’s Arthashastra, 4th century B.C.

Ease of doing business is key to entrepreneurship, innovation and wealth creation.

India has risen significantly in the World Bank’s Doing Business rankings in
recent years, but there are categories where it lags behind – Starting a Business,
Registering Property, Paying Taxes and Enforcing Contracts. This chapter
focuses on these parameters and compares India’s performance with both its
peers and with the best-in-class. For example, registering property in Delhi and
Mumbai takes 49 and 68 days respectively, while it takes 9 days in China and
3.5 days in New Zealand. These performance matrices provide a measure of the
scope for improvement. The chapter then explores the density of laws, rules and
other statutory compliance requirements faced by a manufacturing or services
business (specifically the restaurants segment).
Export competitiveness depends not only on the cost of production but also on the
efficiency of logistics. A series of case studies are used to analyse the time taken
at each stage for specific merchandise items to travel from factory gate to the
warehouse of the foreign customer. For instance, a study found that an apparels
consignment going from Delhi to Maine (U.S.) takes roughly 41 days, but 19 of
these are spent within India due to delays in transportation, customs clearance,
ground handling and loading at sea-ports. A study of carpets exports from Uttar
Pradesh to the United States also showed similar results. The process flow for
imports, ironically, is more efficient than that for exports! In contrast, however,
the imports and exports of electronics through Bengaluru airport was found to be
world class. The processes of Indian airports should be adapted and replicated
in sea-ports.

INTRODUCTION 6.2 India has made substantial gains in the

World Bank’s Doing Business rankings from
6.1 As India leapfrogs towards a five
142 in 2014 to 63 in 2019. It has progressed
trillion-dollar economy by 2024-25, simplifying
on seven out of the 10 parameters.The Goods
and maintaining a business-friendly regulatory
environment is essential. To ease the constraints and Service Tax (GST) and the Insolvency and
and gaps in the regulatory processes involved Bankruptcy Code (IBC) top the list of reforms
in doing business, it is necessary to assess that have propelled India’s rise in rankings. The
the country’s progress vis-à-vis other leading trajectory of India’s performance over the last
economies on various parameters. decade is shown in Table 1.
 Targeting Ease of Doing Business in India 129
6.3 However, India continues to trail in greater in cost than OECD high-income
parameters such as Ease of Starting Business economies, and therefore, impede wealth
(rank 136), Registering Property (rank 154), creation.
Paying Taxes (rank 115), and Enforcing
Contracts (rank 163). It takes roughly 58 6.4 This chapter analyses India’s
days and costs on an average 7.8 per cent of performance in the parameters used in Doing
a property’s value to register it, and 1,445 Business reports, and compares it to its peers
days for a company to resolve a commercial as well as to the best-in-class countries like
dispute through a local first-instance court. New Zealand, which has been ranked number
These figures are longer in time and often one over the past several years.

Table 1: Capturing India’s decade-long journey in the Doing Business Rankings

Parameters 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Ease of starting
169 165 166 173 179 158 155 155 156 137 136
a business
Dealing with
construction 175 177 181 182 182 184 183 185 181 52 27
permits
Getting
- - 98 105 111 137 70 26 29 24 22
electricity
Registering your
93 94 97 94 92 121 138 138 154 166 154
property
Getting credit
for your 30 32 40 23 28 36 42 44 29 22 25
business
Protecting
minority 41 44 46 49 34 7 8 13 4 7 13
investors
Paying taxes 169 164 147 152 158 156 157 172 119 121 115
Trading across
94 100 109 127 132 126 133 143 146 80 68
borders
Enforcing
182 182 182 184 186 186 178 172 164 163 163
contracts
Resolving
138 134 128 116 121 137 136 136 103 108 52
insolvency
Overall Rank 133 134 132 132 134 142 130 130 100 77 63
Source: Doing Business database, World Bank.

6.5 In addition, this chapter presents allows a close look at the nuts-and-bolts of
several case studies and surveys that the business environment. Case studies of
were conducted to capture the on-ground merchandise exports found that logistics is
experience of doing business in the country inordinately inefficient in Indian sea-ports.
including the logistics of merchandise exports The process flow for imports, ironically, is
and imports, the number of permissions more efficient than that for exports. Although
needed to set up a restaurant and so on. This one needs to be careful to directly generalise
130 Economic Survey 2019-20 Volume 1

from specific case studies, it is clear that 6.8 Property registration is another
customs clearance, ground handling and interesting example. It takes nine procedures,
loading in sea ports take days for what can at least 49 days, and 7.4-8.1 per cent of the
be done in hours. A case study of electronics property value to register one’s property in
exports and imports through Bengaluru India. Moreover, the number of procedures,
airport illustrates how Indian logistical time and cost have increased over the last
processes can be world class. The main goal 10 years. Meanwhile, New Zealand has only
of the chapter, therefore, is to help the reader two procedures and a minimal cost of 0.1 per
to identify the most crucial issues when cent of the property value.
evaluating Ease of Doing Business (EoDB)
in India beyond the approach taken by the 6.9 In the case of paying taxes, even
World Bank’s surveys. though the number of payments per year
has significantly reduced in India from 59
GLOBAL COMPARISONS to 12 over the last decade, time spent on this
activity has not reduced much. While India
6.6 In this section, India’s performance
takes 250-254 hours per year to pay taxes,
has been compared with its peers (China,
New Zealand spends just 140 hours a year.
Brazil & Indonesia) as well as the best-in-
Interestingly, time spent to pay taxes in New
class economy in EoDB, i.e., New Zealand.
Zealand has doubled from 2009 to 2019.
In the interest of brevity, the comparisons
are limited to how India fared over the 6.10 Enforcing contracts is one parameter
decade from 2009 to 2019 across only those in which India’s performance has been very
parameters of EoDB where India lags, poor over the years. While India takes 1,445
namely- Starting a Business, Registering days to resolve an average dispute, New
Property, Paying Taxes, and Enforcing Zealand takes approximately one-seventh
Contracts. The comparisons demonstrate the of it, i.e., 216 days. The previous Economic
gap that India needs to travel to achieve the Survey1 had argued that the single biggest
best international standards. constraint to ease of doing business in India
6.7 The number of procedures required to is its inability to enforce contracts and resolve
set up a business in India, for example, has disputes. Given the potential economic and
reduced from 13 to 10 over the past ten years social multipliers of a well-functioning legal
(Table 2). Today, it takes an average of 18 system, this may well be the best investment
days to set up a business in India, down from India can make.
30 days in 2009. On the other hand, New 6.11 When compared to the performance
Zealand has a seamless process of business of India’s peer nations, namely China, Brazil,
incorporation which takes place through a and Indonesia, on the same parameters, it can
single window via one agency. It just takes be seen that China fares much better than
half-a-day with a single form and minimal India on virtually all parameters (Table 3).
cost to set up a business in New Zealand.
Although, India has significantly reduced 6.12 The comparisons with other nations
the time and cost of starting a business, a is not so one-sided. An entrepreneur has to
lot more is needs to be done. Some further go through 10 procedures to set up a business
simplification of processes in India has been in India taking 17-18 days to do so. On the
implemented very recently but it is too early other hand, Indonesia and Brazil require one
to gauge its impact. extra process than India to open a business.
________________________
1
See Economic Survey 2018-19 Chapter 5, Volume I.
 Targeting Ease of Doing Business in India 131
Table 2: Mapping New Zealand across EODB parameters where India struggles

India New Zealand

2009 2019 2009 2019
Starting a Business
Number of Procedures 13 10 1 1
Time – No. of days 30 17/18* 1 0.5
Cost (% of income per capita) 66.1 5.3/ 9.3* 0.4 0.2
Registering Property
Number of Procedures 5 9 2 2
Time – No. of days 44 49/ 68* 2 3.5
Cost (% of property value) 7.4 8.1/ 7.4* 0.1 0.1
Paying Taxes
Number of Payments 59 10/ 12* 8 7
Time (hours per year) 271 250/ 254* 70 140
Total tax payable (% of gross profit) 64.7 49.7# 32.8 34.6
Enforcing Contracts
Time – No. of days 1,420 1,445 216 216
Cost (% of debt) 39.6 31 22.4 27.2
Source: Doing Business database, World Bank.
*: Denotes values for Delhi/ Mumbai as these are the two centres covered by World Bank for India.
#: Before India reduced its Corporate tax rate from 30 to 25 per cent.

Table 3: India v/s Peers on EODB Parameters (2019)

India China Brazil Indonesia
Starting a Business
Number of Procedures 10 4 11 11
Time – No. of days 17/18* 9 17 13
Cost (% of income per capita) 5.3/ 9.3* 1.1 4.2 5.7
Registering your Property
Number of Procedures 9 4 14 6
Time – No. of days 49/ 68* 9 31 31
Cost (% of property value) 8.1/ 7.4* 4.6 3.6 8.3
Paying Taxes
Number of Payments 10/ 12* 7 10 26
Time (hours per year) 250/ 254* 138 1,501 191
Total tax payable (% of gross profits) 49.7# 59.2 65.1 30.1
Enforcing Contracts
Time – No. of days 1,445 496 801 403
Cost (% of debt) 31 16.2 22 70.3
Overall Doing Business Rank 63 31 124 73
Source: World Bank Doing Business Report, 2020.
Note: India numbers are for Delhi/Mumbai respectively, as these are the two centres covered by World Bank for
India.
#: Before India reduced its Corporate tax rate from 30 to 25 per cent.
132 Economic Survey 2019-20 Volume 1

While Indonesia takes four days less than contract in India, Brazil and Indonesia
India, Brazil takes almost the same time as spend 2.2 and 1.1 years, respectively to do
India to do so. In fact, countries like Pakistan, so. With a rank of 163 out of 190 nations in
Turkey and Sri Lanka (ranked 72, 77, and 85 Enforcing Contracts, only a few countries like
respectively in Starting a Business parameter) Afghanistan, Mozambique, and Zimbabwe
have a less cumbersome process to start a perform worse than India.
business than India.
6.16 A holistic assessment and a sustained
6.13 Similarly, while India has five less effort to ease business regulations and
procedures than Brazil (14) to register one’s provide an environment for businesses to
property, it takes much less time to do so in flourish would be a key structural reform that
Brazil (31 days) than in India (49-68 days). would enable India to grow at a sustained rate
Indonesia, on the other hand, has only six of 8-10 per cent per annum. This requires a
procedures and takes same time as Brazil to nuts-and-bolts approach of feedback loops,
register property. monitoring and continuous adjustment. The
6.14 In case of paying taxes, although next section, surveys some of areas where
Indonesia (26) has more than double the there is scope for significant efficiency gains.
number of payments per year than India DENSITY OF LEGISLATION
(10-12), its citizens spend far less time in
paying them than India. Brazil seems to fare AND STATUTORY
particularly poor in this segment. COMPLIANCE REQUIREMENTS
IN MANUFACTURING
6.15 India’s performance in contract
enforcement is poor even when compared 6.17 A major challenge most companies
to India’s peer nations. While it takes face is the complex architecture of
approximately four years to enforce a the Indian governance framework
Table 4: Applicable Rules and Statutory Laws for Manufacturing

No. of No. of
Name of the Act
S. No. Sections Rules, etc. Total
(A)
(B) (A+B)
1. Apprentices Act, 1961 37 14 51
2. Air (Prevention & Control of Pollution) Act, 1981 54 - 54
4. Central Excise Act, 1944 40 90 130
5. Central Excise Tariff Act, 1985 5 - 5
6. Central Sales Tax Act, 1956 26 9 35
7. Companies Act, 2013 470 19 489
8. Contract Labour (Regulation and Abolition) Act, 1970 35 83 118
9. Customs Act, 1962 161 53 214
10. Customs Tariff Act, 1975 13 - 13
11. Depositories Act, 1996 31 - 31
12. Employee Compensation Act, 1923 36 52 88
13. Employee State Insurance Act, 1948 100 211 311
Employment Exchanges (Compulsory Notification of
14. 10 8 18
Vacancies) Act, 1959
 Targeting Ease of Doing Business in India 133

15. Environment (Protection) Act, 1986 26 88 114

Employee Provident Funds & Miscellaneous Provisions
16. 22 156 178
Act, 1952
17. Equal Remuneration Act, 1976 18 6 24
19. Factories Act, 1948 120 128 248
20. Foreign Exchange Management Act, 1999 49 102 151
21. Foreign Trade (Development & Regulation) Act, 1992 20 18 38
22. Finance Act, 1994 36 43 79
Guidelines of Department of Scientific and Industrial
23. - 6 6
Research
24. Income Tax Act, 1961 298 125 423
25. Indian Stamp Act,1899 78 22 100
26. Indian Boiler Act,1923 34 626 660
27. Indian Electricity Act, 2003 185 - 185
28. Indian Wireless Telegraphy Act, 1933 11 13 24
Indian Standard Code of Practice for Selection,
29. Installation and Maintenance of Portable First Aid Fire - 16 16
Extinguishers
30. Industrial Disputes Act,1947 40 80 120
31. Industrial Employment (Standing Orders) Act, 1946 15 22 37
32. Legal Metrology Act, 2009 57 64 121
33. Maternity Benefit Act, 1961 30 - 30
34. Minimum Wages Act, 1948 31 32 63
35 Motor Vehicles Act,1988 217 164 381
36. Narcotic Drugs and Psychotropic Substances Act, 1985 51 68 119
37. Payment of Gratuity Act, 1972 15 17 32
38. Patents Act, 1970 161 139 300
39. Payment of Wages Act,1936 26 13 39
40. Payment of Bonus Act, 1965 40 5 45
41. Petroleum Act,1934 31 202 233
42. Poisons Act, 1919 9 - 9
43. Securities and Exchange Board of India Act, 1992 31 334 365
44. Securities Contract (Regulation) Act, 1956 31 21 52
45. Special Economic Zones Act, 2005 58 6 64
46. Water (Prevention and Control of Pollution) Act, 1974 64 - 64
Water (Prevention and Control of Pollution) Cess Act,
48. 17 9 26
1977
49. Shops and Establishment Act State-wise State-wise State-wise
51. Trade Marks Act,1999 159 185 344
Total 3,214 3,582 6,796
Source: Federation of Indian Chambers of Commerce and Industry (FICCI).
Note: This is not a comprehensive list and not every rule applies to every manufacturer. It is just an illustration of
the wide range of rules that a manufacturer faces.
134 Economic Survey 2019-20 Volume 1

including the density of legislation and four licenses, India requires several more
statutory compliance requirements. A list mandatory licenses and approvals (the
containing the names of Acts applicable comparison is in Table 5 and some of Indian
as well as number of Sections / Rules of requirements are listed in Table 6).
such Acts required to be complied with
by manufacturing units is given in Table 6.20 According to the National Restaurants
4. Manufacturing units have to conform Association of India (NRAI), a total of 36
with 6,796 compliance items, which is a approvals are required to open a restaurant in
tedious and time consuming task. It must Bengaluru, Delhi requires 26, and Mumbai
be noted that this is not a comprehensive 22. Moreover, Delhi and Kolkata also require
list and not every rule applies to every a ‘Police Eating House License’. The number
manufacturer. It is just an illustration of of documents needed to obtain this license
the bewilderingly wide range of rules that from Delhi Police is 45 – far more than the
the sector faces. number of documents required for a license
to procure new arms and major fireworks, 19
STARTING A BUSINESS: and 12 respectively (Table 7).
REGULATORY HURDLES IN 6.21 Moreover, in India, only the list of
OPENING A RESTAURANT licenses and permissions can be obtained
from a government portal or information
6.18 The services sector too faces
center. On the other hand, in New Zealand,
many regulatory hurdles even for routine
the website of Auckland Council (operated
businesses. The bars and restaurants sector
by a private third-party agency) has all
is an important source of employment and
detailed guides and stepwise procedures
growth everywhere in the world. It is also
about permissions, fees and timeline to open
a business that, by its nature, faces a high
a restaurant. The website is also equipped
frequency of starting new businesses and
with ready-to-use business plan templates
shutting old ones.
and comprehensive information on different
6.19 A survey showed that the number businesses irrespective of the scale of
of licenses required to open a restaurant in business. The contrast reflects a difference
India are significantly more than elsewhere. in approach – government control versus
While China and Singapore require only curation/ partnership.

Table 5: Licenses Required to Open a Restaurant

Country Market Size (US $ billion) No. of licenses Nature of licenses

India 61 12-16* As detailed in Table 6
Food shop License
Liquor License
Singapore 8.3 4
Importing Food License
Halal Certificate
Sanitation License
Environment License
China 815 4
Fire License
Sales License
Source: National Restaurants Association of India (NRAI).
Note: * These are just key licenses. In practice, each city requires several more approvals as mentioned in the text.
 Targeting Ease of Doing Business in India 135
Table 6: Key Mandatory Licenses required to open a Restaurant in India

S. No. License Authority Delhi Mumbai Bangalore Kolkata

1. Food Safety FSSAI Yes Yes Yes Yes
Municipal
2. Heath/Trade Yes Yes Yes Yes
Corporation
Police Eating House Police Commissioner
3. Yes Yes
License Licensing
4. Fire NOC Fire Department Yes Yes Yes Yes
Shops &
5. Labor Department Yes Yes Yes Yes
Establishment
Liquor License (If
6. Excise Department Yes Yes Yes Yes
serving Liquor)
Tourism License (for
7. Tourism Department Yes
liquor service)
Environment
Clearance for Grease State Pollution
8. Yes Yes
Trap/ETP (Water Control Board
Pollution Act)
Environment
Clearance for Gen State Pollution
9. Yes Yes
Sets (Air Pollution Control Board
Act)
Legal Metrology
10. Weights and Measures Yes Yes Yes Yes
Department
Copyright Societies
11. Music License registered by Govt. Yes Yes Yes Yes
of India
Municipal
12. Signage License Yes Yes Yes Yes
Corporation
13. GST/VAT Registration GST/Tax Authorities Yes Yes Yes Yes
Employees State Labor/ PF
14. Yes Yes Yes Yes
Insurance/ PF Commissioner
Lift License (if lift
15. Electrical Inspector Yes Yes Yes Yes
installed)
Delivery Bikes (if
16. FSSAI Yes Yes Yes Yes
employed)
Source: National Restaurants Association of India (NRAI).

Table 7: Documents required for obtaining a license from Delhi Police

Type of license Number of documents required
Eating and Lodging Establishments License 45
New Arms license 19
Fireworks license 12
Source: Delhi Police Licensing.
136 Economic Survey 2019-20 Volume 1

CONSTRUCTION PERMITS just over two months to obtain a construction

permit, while Delhi takes almost four months.
6.22 Table 8 shows the procedures, time,
Moreover, it takes 35 days to get water and
and costs that businesses in Delhi have to
sewer connection in Delhi.
undergo for building a factory/warehouse,
including obtaining necessary licenses and 6.24 Nonetheless, it must be noted that India
permits, completing required notifications and has considerably improved the process to obtain
inspections, and obtaining utility connections. construction permits over the last five years.
6.23 When compared to the best in class- Compared to 2014, when it took approximately
Hong Kong, which tops the World Bank 186 days and 28.2 per cent of the warehouse
rankings for ease of obtaining construction cost; in 2019 it takes 98-113.5 days and 2.8-5.4
permits, it can be seen that Hong Kong takes per cent of the warehouse cost (Figure 1).
Table 8: Construction Permits - Delhi vs Hong Kong
DELHI, INIDA (RANK 27) Days Days HONG KONG (RANK 1)
Submit online Common Application Form along Obtain approval by submitting applications to the
with requisite building permit fees and drawings 0.5 45 One Stop Center

Receive inspection by Building Dept. on foundation

Request & obtain release of building sanction plans 30 1 strata

Submit online notice of completion up to the plinth Request and receive inspection on the superstructure
level and get inspection done 15.5 1 construction

Submit notice of completion, receive final Receive an audit inspection by the Building
inspection & obtain Fire NOC 2.5 1 Department

Obtain completion/occupancy permit Submit notification of project completion and

30 1 relevant applications

Request water and sewer connection approval and Obtain relevant certificates through the One Stop
35 18 Center
inspection
Receive joint & final inspection of licensing
1 authorities; Obtain Water & Sewerage connection

113.5 Days Time Taken 69 Days

2.8 Cost (% of Warehouse) 0.3

Source: World Bank Doing Business Report, 2020.

Figure 1: Cost of Construction Permits in India

No. of Procedures
30 28.2 185.9 190
25.4 Cost (% of warehouse)
25 Time (Days)
160
20
15
15 130

10 106
100
5 4

0 70
2014 2019
Source: World Bank Doing Business database.
 Targeting Ease of Doing Business in India 137

ACHIEVING SCALE ACROSS 6.26 Compared to Bangladesh, China, and

BUSINESS Vietnam, which have more than 80 per cent of
market value of exports by large enterprises,
6.25 One issue that gets in the way of India has 80 per cent by small enterprises.
business efficiency in India is that of scale. Most
Moreover, in India it can take 7-10 days to
of the manufacturing units in India have small
reach a port whereas in countries like China,
capacities and consequently low manufacturing
efficiencies which are a disadvantage in the Bangladesh and Vietnam it takes less than a
global supply chain. Countries like Bangladesh, day. Thus, the Indian supply chain ends up
China, Vietnam are able to progress in the value with a large number of small consignments
chain by increasing their competitiveness in the clogging already inefficient logistics pathways.
international market by improving their delivery A comparison of turn-around time (i.e., order to
time and domestic production capacity. deliver) is given in Table 9.

Table 9: Emerging Economies Comparison - Scale and Logistics

Bangladesh China India Vietnam

80% large 80% or more large 80% small 80% or more large
Scale of Operations
enterprises enterprises enterprises enterprises
Turn Around Time (in Days)
50 31 63 46
(from order to delivery)
Time Taken to reach port (in
1 0.2 7-10 0.3
Days)
Source: High Level Advisory Group (HLAG) Report, 2019.

TRADING ACROSS BORDERS imports) occur on account of port or border

handling processes which essentially pertain
6.27 The Trading Across Borders indicator to procedural complexities (number and
records the time and cost associated with the multiplicity of procedures required for trade),
logistical process of exporting and importing multiple documentations and involvement
goods. Globally, transportation by ports is the of multiple agencies for approvals and
most favored followed by railways and then clearances. It is also observed that time delays
roads, whereas in India it is the opposite. and procedural inefficiencies end up pushing
cost to trade.
6.28 Italy tops the EoDB rankings in
Trading Across Borders. Table 10 tabulates 6.30 While the government has already
its comparison with India. While India reduced procedural and documentation
takes 60-68 and 88-82 hours in border and requirements considerably, increasing
documentary compliance for exports and digitalization and seamlessly integrating
imports respectively, Italy takes only one hour multiple agencies onto a single digital
for each. Moreover, the cost of compliance is platform can further reduce these procedural
zero in Italy. In India, it costs US$ 260-281 inefficiencies significantly and improve user
and US$ 360-373 for exports and imports experience substantially. The accompanying
respectively. box discusses the Authorized Economic
Operators scheme that is being used to
6.29 It must be noted that almost 70 smoothen the process for registered exporters/
per cent of the delays (both in exports and importers.
138 Economic Survey 2019-20 Volume 1

Table 10: Trading across Borders- India vs Italy

Source: World Bank Doing Business Report, 2020.

Note: India numbers are for Delhi/Mumbai respectively, as these are the two centres covered by World Bank for
India.

BOX 1: Authorised Economic Operators (AEO)

Authorised Economic Operator (AEO) is a programme under the aegis of the World Customs
Organization (WCO) SAFE Framework of Standards to secure and facilitate Global Trade. The
programme aims to enhance international supply chain security and facilitate movement of goods.
AEO encompasses various players in the international supply chain. Under this programme, an entity
engaged in international trade is approved by Customs as compliant with supply chain security standards
and granted AEO status. An entity with an AEO status is considered a ‘secure’ trader and a reliable
trading partner. AEO is a voluntary programme. It enables Indian Customs to enhance and streamline
cargo security through close cooperation with the principle stakeholders of the international supply
chain viz. importers, exporters, logistics providers, custodians or terminal operators, custom brokers
and warehouse operators, who benefit from preferential treatment from customs authorities. Benefits
include expedited clearance times, fewer examinations, improved security and communication
between supply chain partners, and more. The Circular 33/2016 – Customs dated July 22, 2016
provides the statutory framework for the AEO programme.
There are three tiers of certification in the new AEO Programme for importers and exporters:
1. AEO T1 – Verified on the basis of document submission only.
2. AEO T2 – In addition to document verification, onsite verification is also done.
3. AEO T3 – For AEO T2 holders who have enjoyed the status for two years only on the
basis of document verification and for AEO T2 holders who have not enjoyed the status
continuously or have introduced major changes in business, the applicant is subjected to
physical verification.
 Targeting Ease of Doing Business in India 139

For logistics providers, custodians or terminal operators, custom brokers and warehouse operators
there is only one tier:
AEO LO – Here onsite verification is done in addition to document verification.
Who is entitled for AEO Certification
Anyone involved in the international supply chain that undertakes Customs related activity in India
can apply for AEO status irrespective of size of the business. These may include exporters, importers,
logistic providers (e.g. carriers, airlines, freight forwarders, etc.), custodians or terminal operators,
customs house agents and warehouse owners. Others who may qualify include port operators,
authorized couriers, stevedores. The list is not exhaustive.
Eligibility
Any legal entity that undertakes Customs related work can apply for the AEO Programme if they fulfil
the following conditions:
1. They have handled 25 Import or Export documents in last Financial Year.
2. They have had their business activity for last three Financial Year (can be waived in
deserving cases).
3. The applicant must have been Financially Solvent for the last three financial years.
4. The applicant must not be issued a show cause notice involving ‘fraud, forgery, outright
smuggling, clandestine removal of excisable goods or cases where Service Tax has been
collected from customers but not deposited to the Government during last three financial
years.
An entity can apply for AEO-T1 certification online, by visiting: https://www.aeoindia.gov.in/. Table
A lists the number of AEO compliant entities in India.
Table A: AEO Certified Entities in India as on January 17, 2019
AEO Tier Number of AEO status holders
AEO T1 2,842
AEO T2 491
AEO T3 8
AEO LO 745
Total 4,086
Source: Central Board of Indirect Taxes and Customs (CBIC).

CASE STUDIES OF INDIA’S from an apparel factory in Delhi, which is a

PERFORMANCE IN LOGISTICS non-AEO (Box 1), that exports its products
IN SPECIFIC SEGMENTS to Maine, U.S. via India’s largest sea port
Nhava Sheva in Maharashtra, India’s largest
6.31 This section presents the results of
sea port. Table 11 traces the logistics of the
case studies and industry surveys conducted
export consignment.
in October-December 2019 by the ‘Quality
Council of India’ in order to understand 6.33 The study found that after the shipment
the specific points in the supply-chain that leaves the factory gate in Delhi, it takes five
experience inordinate delays and blockages. days to reach Jawaharlal Nehru Port Trust
(JNPT). However, six processes in Nhava
I. Case Study of Exporting Apparels
Sheva can take up to 14 days, of which a day
6.32 This case study tracks consignments or two is spent just on ‘Unloading’ depending
140 Economic Survey 2019-20 Volume 1

on space availability at the port. Three days for entry into the ship’. This is partly due to
are then used up in ‘Custom Clearance’, insufficient port infrastructure to handle the
another three days in ‘Stuffing Containers’ inflow of containers, narrow roads and poor
and up to five days are taken up by ‘queue strength bearing capacity of the roads at the port.

Table 11: Tracing an Apparel Export Consignment from Delhi to Maine, United States
Place Action Day No. of Days
INDIA
Delhi Shipment ready at factory Day 1
Delhi
Haryana
Transport of shipment via truck/
Rajasthan Day 1 – 5 5 days
train to JNPT
Gujarat
Maharashtra
19 Days in India

Shipment reaches JNPT Day 5

a) Unloading Day 5/6

b) Custom clearance Day 6/7 - 8

Nhava Sheva, Up to 14
c) Stuffing in container Day 8/9 - 12
Maharashtra days
d) Queue for entry into ship Day 12/13 - 17

e) Handover to shipping line Day 17/18

a) Departure of Ship Day 18/19
19 Days at High

Day 18/19 – Day

Seas

High seas Ship traveling at seas 19 days

38

UNITED STATES
Reaches port Day 38
Clears customs (considering all
3 Days in U.S.

Houston, U.S. documentation is in place and Day 38/39

inspections render safe results) 3 days
Loading & Departure Day 39

Maine, U.S. Reaches buyer in US Day 40/41

Source: QCI Calculations.
 Targeting Ease of Doing Business in India 141
However, much of the delay is due to the the consignment, provided all paper work
misalignment of processes that do not allow and regulatory requirements are met. The
for “just in time” protocols. The uncertainty consignment then reaches the buyer’s
of time needed to clear each step means that warehouse in Maine within two days.
exporters have to pad up the time spent waiting.
6.35 In short, of the total 41 days taken
This adds to the clogging of port space.
by the consignment from factory in Delhi to
6.34 Once the ship leaves the port, the warehouse in Maine, 19 days were spent in
consignment travels for 19 days by sea, India, 19 days at sea and roughly three days in
reaching Houston, U.S. on day 38. Here, the United States. There is obvious scope for
Customs take at most a day’s time to clear improvement.

Table 12: Tracing a Carpet Export Consignment from Mirzapur to New Jersey
Place Action Day No. of Days
INDIA (AEO)
Mirzapur, U.P. Shipment ready at factory Day 1 1 day
Mirzapur to Piyala, Transport of shipment via truck to
Day 1 – 3 2 days
Haryana ICD Piyala
Shipment reaches Piyala Day 3
Custom clearance Day 3/4
13 Days in India

Piyala Stuffing in container Day 4-7 4 days

Departure to Mundra Sea Port by
Day 7
Train
Transport of shipment via train to
Rail Travel Day 7 – 10/11 3-4 days
Mundra
Queue with the truck to enter the Day 11 (6-7
Mundra Sea Port port hours)
Loading of vessel Day 11-13 2 days
(Gujarat)
Departure of Ship Day 13
22 Days at
High Seas

Day 13 – Day
High seas Ship traveling at seas 22/23 days
35/36

UNITED STATES
Reaches port Day 36

New York Sea Port Clears customs (considering all

5 Days in U.S.

documentation is in place and Day 36-39

inspections render safe results)
4-5 days
Transportation to New Jersey
Road Travel Day 39/40
Warehouse
New Jersey Reaches warehouse Day 40
Source: QCI Calculations.
142 Economic Survey 2019-20 Volume 1

II. Case Study of Exporting Carpets 773 kms away. Just two hours are spent in
custom clearances and then it takes only
6.36 A similar exercise was done for
an hour’s time to load the ship. This means
a carpet manufacturer, who is an AEO,
that the consignment spends less than a
exporting products from Mirzapur in Uttar
day from factory to ship. It is possible to
Pradesh to New Jersey in the U.S. (Table 12).
do this because of well-oiled “just-in-time”
6.37 After the shipment leaves the factory processes. The ship then spends 23 days
in Mirzapur, it takes two days to reach the on high seas, reaching Mundra sea port in
Inland Container Depot (ICD) in Piyala, Gujarat on Day 24. The next six days are
Haryana. At the ICD, the consignment is spent at Mundra port, of which, about two
cleared by Customs in a day’s time. In the days are used up waiting outside the port
next three days the consignment is stuffed in for entry, followed by another two days in
containers and sent to Mundra. custom clearance and a queue of 6-7 hours to
exit the port. Lastly, the shipment reaches its
6.38 It takes three to four days to transport
final destination- Beawar, Rajasthan on Day
the shipment via train to Mundra sea port.
31, including the two days of travel time by
Another 6-7 hours are used up in queue to
road. Thus, it takes 8 days in India to undergo
enter the port. The vessel is loaded in the next
two days and the ship departs on day 13. The border compliances and travel time before
ship takes around 23 days to reach New York the consignment reaches the buyer.
sea port on day 36. Here, Customs takes two- 6.42 To summarize, while it takes only
three days to clear the consignment, provided one day in Italy to transport, and complete
all paper work and regulatory requirements border compliance and documentation, India
are met. In the next two days the consignment takes eight days to complete the import
is transported to the warehouse in New Jersey. process (note that the importer for this study
6.39 To sum up, of the 40 days, 13 days was an Authorised Economic Operator).
are spent in India, another 22 days at sea and Nonetheless, it is interesting to note that
4-5 days in the U.S. before the consignment the imports process takes less time than the
reaches the final buyer in New Jersey. exports process.
Although, being an AEO significantly reduces
6.43 The results of the case study approach,
the number of days a shipment takes to depart
by definition, are limited by sample size,
from India (compared to the previous case),
but the above results were cross verified
it still takes an inordinate amount of time
by QCI by interacting with a wide cross
within the country.
section of importers and exporters in order
III. Case Study of Importing Carpets to confirm that the collected data broadly
fits their experience. The following were the
6.40 Another way to understand the outcomes (a) the inordinate delays in loading
process flow of logistics is to look at it in
and customs processes in Indian sea-ports
reverse. This case study tracks the timelines
(b) the processes for imports, ironically, are
involved while importing carpets from Milan,
better than those for exports (c) the large
Italy to a warehouse in Beawar, Rajasthan
variance in process time means that exports
(Table 13).
are forced to account for the uncertainty by
6.41 Once the shipment is ready at the padding extra waiting time. This means that
factory gate in Milan, it takes only 10 it is not good enough to simply improve the
Hours to transport the shipment to Naples, “average” without improving reliability.
 Targeting Ease of Doing Business in India 143
6.44 It must be noted that the turnaround the case of sea ports is possible. Although, a
time of ships in India has been on a continuous full case study of Chennai port was not done,
decline, almost halving from 4.67 days in partial data suggests that its processes are
2010-11 to 2.48 days in 2018-192. This shows smoother than those of the ports discussed
that achieving significant efficiency gains in above.

Table 13: Tracing a Carpet Import consignment from Milan to Beawar

Place Action Time No. of Days/ Hours
ITALY

Milan Shipment ready at factory in Milan

Milan
Bologna
13 Hours in Italy

San Marino
Transport of shipment to Naples Day 1 10 Hours
Rome
Naples
(773 km)
Customs clearance
Day 1 2 Hours
Documentary compliances
Naples
Loading
Day 1 1 Hour
Departure of ship
23 Days at
High Seas

High seas Ship traveling at seas Day 2-24 23 days

INDIA (AEO)
Shipment reaches Mundra Port at Sea
Day 24
Shore
Vessel waiting time outside the port
Day 24-26
before entry
Unloading shipment at port Day 26
Mundra Handling shipment
Sea Port Day 27 6 days
8 days in India

at port
(Gujarat)
Clearing security
Custom
inspections
Clearance Day 28
conducted by port
authorities
Day 29
Queue with the truck to exit port
(6-7 Hours)
Transport of shipment via truck to
Road Travel Day 29
Beawar Rajasthan
2 days
Beawar
Shipment reaches factory at Beawar Day 31
(Rajasthan)
Source: QCI Calculations.
_________________
2
See Economic Survey 2019-20 Chapter 9, Volume II.
144 Economic Survey 2019-20 Volume 1

IV. Case Study of Electronics ready at the factory in Bangaluru, it takes

three hours to transport it to Kempegowda
6.45 Although, the processes at sea-ports
Airport. At the airport, it takes one hour to
remain very inefficient, those at airports
enter exports terminal. So far, there is no
have dramatically improved. Indeed, a case
difference between AEO and non-AEO.
study of an electronics company based in
Bangaluru, which is currently AEO-T2 However, total time spent at the airport for
certified, found that Indian systems can be Customs and examination process is just
world class. It also provides some insight into two hours for AEO-T2 operators. Non-AEO
how the business environment has changed operators take 6 hours.
for some segments after the implementation 6.47 In fact, after AEO implementation,
of AEO policy in 2016. the total time spent in India (six hours) is less
6.46 Tables 14 (a) and (b) compare the than that spent in Hong Kong (seven hours).
time taken for exporting electronics from This shows, with the help of right policies,
Bangaluru to Hong Kong, with and without India can achieve international standards, or
AEO registration. Once the shipment is even better them.

Table 14 (a): Tracing Electronics Export consignment from Bangaluru to Hong Kong (Non AEO)

  Place Action Time

INDIA- (NON AEO)

Bangaluru, Karnataka Shipment ready at factory  

Warehouse to Kempegowda Airport,

Transport of shipment via truck to
10 Hours in India

Bangaluru 3 Hours
Airport
Distance – 70Km

Export Terminal Entry 1 Hour

Shipment reaches Airport
Customs Registration 2 Hours

Examination & Let Export of

4 Hours
Shipping Bill
5 Hour
Flight

Air travel 5 Hours

HONG KONG
7 Hours in Hong

Hong Kong Reaches Hong Kong Airport  

Kong

Customs Clearance Inspection & Pass out Order 4 Hours

Transportation from airport to

Road Travel 3 Hours
warehouse
Source: Survey Calculations.
 Targeting Ease of Doing Business in India 145
Table 14 (b): Tracing Electronics Export consignment from Bangaluru to Hong Kong (AEO)

  Place Action Time

INDIA (AEO T2)

Bangaluru, Karnataka Shipment ready at factory  

Warehouse to Kempegowda Airport,

Transport of shipment via truck
6 Hours in India

Bangaluru 3 Hours
to Airport
Distance – 70Km
Export Terminal Entry 1 Hour

Shipment reaches Airport Customs Registration 1 Hour

Examination & Let Export of
1 Hour
Shipping Bill
5 Hour Flight

Air travel 5 Hours

HONG KONG
Hong Kong Reaches Hong Kong Airport  
7 Hours in Hong Kong

Customs Clearance Inspection & Pass out Order 4 Hours

Transportation from airport to

Road Travel 3 Hours
warehouse

Source: Survey Calculations.

6.48 Again, the process flow was studied in Airport, Bangaluru. It then takes 14 and
reverse. Tables 15 (a) and (b) compare the time 11 hours respectively for a Non-AEO and
taken in importing electronics from China to AEO consignment to reach the warehouse in
Bangaluru, with and without AEO. After the Bangaluru.
shipment is ready in factory at Shenzhen, it
6.50 The case study suggests the following
takes two days to transport it to Hong Kong
conclusions: (a) the processes in Indian airports
airport.
is vastly superior to those at sea ports for both
6.49 At the airport, an hour is spent on imports and exports; (b) AEO did significantly
export declaration, two hours on customs improve the process but it is reasonably smooth
clearance and another four hours in loading even for non-AEO operators importing/
the aircraft at the terminal. After a five hour air exporting electronics (c) Indian processes can
travel, the consignment reaches Kempegowda beat international standards.
146 Economic Survey 2019-20 Volume 1

Table 15 (a): Tracing Electronics Import consignment from China to Bangaluru (Non AEO)
  Place Action Time
CHINA
Shenzhen, China Shipment ready at factory  
2 days & 7 Hours in

From warehouse in Shenzhen to Transport of shipment via

2 days
Hong Kong Airport truck to Airport
China

Export Declaration 1 Hour

Shipment reaches Airport Customs Clearance 2 Hours

Acceptance to flight at
4 Hours
Terminal
5 Hour
Flight

Air travel 5 Hours

INDIA- (NON AEO)

14 Hours in India 

Bonding/ Manifest of Cargo 3 Hours

Shipment reaches Airport in
Customs Clearance 6 Hours
Bangaluru
Cargo Delivery process 1 Hours
Transportation from airport
Road Travel 4 Hours
to warehouse
Source: Survey Calculations.

Table 15 (b): Tracing Electronics Import consignment from China to Bangaluru (AEO)
Place Action Time
CHINA
Shenzhen, China Shipment ready at factory  
5 Hour 2 days & 7 Hours in

From warehouse in Shenzhen to Hong Transport of shipment via truck

2 days
Kong Airport to Airport
China

Export Declaration 1 Hour

Shipment reaches Airport Customs Clearance 2 Hours
Acceptance to flight at Terminal 4 Hours
Flight

Air travel 5 Hours

INDIA- (AEO T2)

Bonding/ Manifest of Cargo 3 Hours
11 Hours in India

Shipment reaches Airport in Bangaluru Customs Clearance 3 Hours

Cargo Delivery process 1 Hours
Transportation from airport to
Road Travel 4 Hours
warehouse
Source: Survey Calculations.
 Targeting Ease of Doing Business in India 147

CONCLUSION a restaurant, India requires several more

mandatory licenses and approvals: Delhi
6.51 This chapter looked at the Ease of requires 26, Bangaluru 36, and Mumbai
Doing Business in India from various aspects.
requires 22. In addition, Delhi requires a
First, it compared India’s performance on
‘Police Eating House License’ from Delhi
World Bank’s EoDB rankings with its peers as
Police that asks for 45 documents compared
well as the best-in-class. The analysis focused
to just 19 needed to buy a gun. The scope for
on the four parameters where India lags behind
streamlining is clear.
viz- Starting Business Registering Property,
Paying Taxes, and Enforcing Contracts. 6.53 Lastly, a series of case studies and
The findings clearly show the large scope industry surveys are used to analyse the time
for improvement in all categories. While it taken at each stage of the supply chain for
takes approximately four years to enforce a specific merchandise items to travel from
contract in India; New Zealand, Indonesia, factory gate to the warehouse of the foreign
China and Brazil require 0.6, 1.2, 1.4 and 2.2 customer. These confirmed the following
years respectively. With a rank of 163 out of (a) the inordinate delays in loading and
190 nations in Enforcing Contracts, only a customs processes in Indian sea-ports (b) the
few countries like Afghanistan, Mozambique, processes for imports, ironically, are better
and Zimbabwe perform worse than India. than those for exports (c) the large variance
Similar comparisons have been shown for
in process time means that exports are forced
other categories.
to account for the uncertainty by padding
6.52 Secondly, the chapter throws light extra waiting time. In contrast, however, the
on the maze of laws, rules and regulations imports and exports of electronics through
in manufacturing and services (particularly Bengaluru airport was found to be world
restaurants) sector. While China and class. The processes of Indian airports should
Singapore require only four licenses to open be adapted and replicated in sea-ports.

CHAPTER AT A GLANCE
 India has jumped up 79 positions in World Bank’s Doing Business rankings, improving
from 142 in 2014 to 63 in 2019. However, it continues to trail in parameters such as
Ease of Starting Business (rank 136), Registering Property (rank 154), Paying Taxes
(rank 115), and Enforcing Contracts (rank 163).

 Enforcing a contract in India takes on average 1,445 days in India compared to just
216 days in New Zealand, and 496 days in China. Paying taxes takes up more than
250 hours in India compared to 140 hours in New Zealand, 138 in China and 191 in
Indonesia. These parameters provide a measure of the scope for improvement.

 Setting up and operating a services or manufacturing business in India faces a maze of

laws, rules and regulations. Many of these are local requirements, such as burdensome
documentation for police clearance to open a restaurant. This must be cleaned up and
rationalized one segment at a time.
148 Economic Survey 2019-20 Volume 1

 Case studies of merchandise exports found that logistics is inordinately inefficient in

Indian sea-ports. The process flow for imports, ironically, is more efficient than that
for exports. Although one needs to be careful to directly generalize from specific case
studies, it is clear that customs clearance, ground handling and loading in sea ports
take days for what can be done in hours. A case study of electronics exports and
imports through Bengaluru airport illustrates how Indian logistical processes can be
world class.
 It must be noted that the turnaround time of ships in India has been on a continuous
decline, almost halving from 4.67 days in 2010-11 to 2.48 days in 2018-19. This shows
that achieving significant efficiency gains in the case of sea ports is possible. Although,
a full case study of Chennai port was not done, partial data suggests that its processes are
smoother than those of the ports discussed above.
 The streamlining of the logistics process at sea-ports requires close coordination
between the Logistics division of the Ministry of Commerce and Industry, the
Central Board of Indirect Taxes and Customs, Ministry of Shipping and the
different port authorities. The simplification of the Ease of Doing Business
landscape of individual sectors such as tourism or manufacturing, however,
requires a more targeted approach that maps out the regulatory and process bottle-
necks for each segment. Once the process map has been done, the correction can
be done at the appropriate level of government - central, state or municipal. 

REFERENCES Department of Commerce. “High-

Level Advisory Group (HLAG).”
World Bank. “Doing Business.” The World New Delhi, 2019. https://commerce.
Bank Group. (Various Editions). https:// gov.in/writereaddata/uploadedfile/
www.doingbusiness.org/en/doingbusiness MOC_637084607407371826_HLAG%20
Report%20.pdf
Department of Commerce. “Logistics Ease
Across Different States (LEADS Index).” Niti Aayog. “Ease of Doing Business:
New Delhi, 2019. https://commerce. An Enterprise Survey of Indian States.”
gov.in/writereaddata/UploadedFile/ New Delhi, 2017. https://niti.gov.in/
MOC_637051086790146385_LEAD_ writereaddata/files/document_publication/
Report.pdf EoDB_Single.pdf