NEW DELHI: In 2020 India reached 63rd place on the World Bank’s Ease of Doing Business index up from 142nd in 2014. It was a genuine achievement built on real reforms. Digital incorporation, GST e-filing, the Insolvency and Bankruptcy Code and online construction permits all contributed to the jump.
One year later the World Bank discontinued the index entirely after an internal review found serious data integrity issues and evidence of undue pressure on staff to alter country scores. The 2018 and 2020 datasets were withdrawn. India’s 63rd rank has not been updated since and cannot be.
What has continued, uninterrupted, is India’s startup failure rate. Multiple industry studies estimate that around 90% of Indian startups fail within their first five years. Only a small minority survive beyond a decade. The ranking told one story the survival data tells another.
What the Reforms Actually Fixed
The reforms India implemented between 2014 and 2020 were real and measurable. Company incorporation moved online through MCA-21 and SPICe+. GST replaced a fragmented multi-tax structure. The IBC created a formal insolvency resolution process for the first time and commercial courts were established to handle business disputes faster. These were not cosmetic changes.
The results showed up in the specific sub-indices that the reforms targeted. India’s score on starting a business improved significantly. Getting credit improved, resolving insolvency one of the biggest gains moved India from near the bottom to a mid-table position globally.
But two indicators remained stubbornly weak. Enforcing contracts ranked India around 170th out of 190 economies. Paying taxes placed India around 100th. These were the indicators that the reforms did not fix and they are precisely the indicators that determine whether a startup survives its first five years.
What the Rankings Did Not Measure
A typical GST-registered MSME or startup files 12 to 13 monthly GST returns annually alongside income tax filings, TDS returns and multiple labour law submissions. A 2025 TeamLease RegTech report estimates that manufacturing MSMEs spend ₹13 to ₹17 lakh per year on compliance a significant burden for a business with thin margins and limited capital.
Enforcing a contract through Indian courts takes an average of 1,445 days nearly four years. The OECD average is under 400 days, a startup waiting nearly four years for a payment dispute to resolve does not have the runway to survive that wait. Many simply absorb the loss and move on or shut down.
Resolving insolvency under the IBC takes an average of 716 days at the NCLT level as of 2023-24. The process has improved from over 1,000 days in early cohorts but it remains far from the under-12-month timelines seen in high-performing economies. Closing a failed business in India is still a slow and costly process. That matters because founders who cannot exit cleanly are less likely to start again which compounds the ecosystem’s loss of talent and experience.
Where the Money Goes and Who Gets It
India attracted approximately 8 to 9 billion in startup funding in FY2024-25. That number sounds large until you examine where it goes. Around 70 to 80% of total Indian startup funding is concentrated in Bengaluru, Mumbai and Delhi-NCR according to 2024-25 NASSCOM and Inc42 data. A startup in Patna, Coimbatore or Guwahati competes for the remaining 20 to 30% often against better-connected founders with warmer investor relationships in the three dominant cities.
The RBI estimates India’s MSME credit gap at roughly ₹20 to ₹25 lakh crore annually. Only about one in three micro-enterprises fully accesses formal credit lines according to a 2024 RBI-linked study. The rest rely on informal sources at higher cost and lower reliability. RBI Deputy Governor Swaminathan J stressed in 2024 that despite collateral-free lending up to ₹10 lakh many MSMEs still face exclusion from formal credit because of weak financial records and limited credit history.
The angel tax provisions under Section 56(2)(viib) of the Income Tax Act has repeatedly deterred early-stage investment by treating above-book-value equity rounds as taxable income. Multiple amendments have partially addressed it but the uncertainty it creates persists. Foreign investors consistently cite regulatory uncertainty alongside tax-policy volatility and slow dispute resolution as their top barriers to deploying capital in India at scale.
What Is Actually Working
The bright spots are real and should not be dismissed. India is the third-largest startup ecosystem in the world with over 100 active unicorns as of 2024-25. UPI crossed 120 billion transactions and ₹180 lakh crore in value in FY2024-25 creating a payments infrastructure that has enabled fintech startups to operate at a scale that would have been impossible a decade ago. The Startup India initiative has recognised over 1.5 lakh startups and the government claims over 10 lakh jobs created through the programme.
The GeM portal has given startups direct access to government procurement an important revenue channel for early-stage businesses that previously had no path into public sector contracts. Some states Gujarat, Andhra Pradesh and Telangana among them have improved their ease-of-doing-business scores meaningfully through state-level BRAP reforms.
The Economic Survey 2024-25 acknowledges both sides of this picture directly celebrating the size of the ecosystem while calling for better access to patient capital, improved dispute resolution and smoother labour law transitions as the reforms still needed.
The Gap That Explains Everything
The World Bank’s Ease of Doing Business index measured what governments do on paper how many procedures exist, how many days they take in theory, whether laws have been passed. It did not measure what entrepreneurs experience in practice how long courts actually take, whether credit actually flows, whether a startup in Ranchi gets the same regulatory clarity as one in Bengaluru.
India closed the gap between its laws and its rankings between 2014 and 2020. It has not yet closed the gap between its rankings and its streets. Several recent policy studies argue that financing and skill gaps remain major constraints despite reforms.
The Standing Committee on Commerce noted in a 2025 report that while the number of registered startups and funding volumes have grown, failure-rate data and post-incubation outcomes are not systematically tracked making it hard to measure whether policy is actually working for the founders who most need it to.
A 79-place jump in a now-discontinued index is a milestone worth marking. Building an ecosystem where more than 10% of startups survive a decade is the milestone that still needs to be reached.
About the Author
