Doing Business in India remains tough, ranks 132nd in 185 Economies

2

India has been ranked 132nd in World Bank’s (WB) Doing Business Report 2013. The report measures how easy or difficult it is for a local to start and run a small to medium sized business while complying with regulations, formalities and procedures. Of all the benchmarks it emerged that getting credit to start a business in India was the easiest of all, while dealing with construction permits and enforcing contracts were the most difficult.

The report measured the business environment of each country by taking into account 11 key benchmarks across various stages of a business’ life cycle. On a worldwide basis India’s 132nd rank compared to Brazil (130), Philippines (138), Russian Federation (112) and China (91). Singapore was ranked 1st followed by Hong Kong (2), New Zealand (3), United States (4) and Denmark (5). UK was ranked 7th while Australia was ranked 10th.

When it comes to accessing and availing credit for businesses, India ranks 1st in South Asia and is among the top 25 countries in the world, according to WB’s Doing Business Report 2012. A reform involving creating a central and unified electronic registry of debtors has aided availing business credit in India.

India Inc was also given a higher than average rank for the critical benchmark of Registering Property. With the assumption that both the buyer and seller were limited liability companies, the Doing Business Report 2013 noted that it took 5 procedures, 44 days and 7.3% of the property value to register a property. Included in the 44 days was an 8 to 10 day period for preparing, executing and paying for the final sale deed along with submitting the documents to the local office of the Sub-Registrar.

Doing Business in India [2012 vs 2013]

Doing Business Rank 2013

According to WB, India Inc faired poorest in the benchmark of Enforcing Contracts, which was measured by various indicators including the procedure to enforce a contract through courts, time it took to complete the procedure and the costs incurred.

Doing Business’ data suggested that it took 1,420 days or nearly 4 years to enforce a contract and cost the claimant 39.6% of the claim value. In comparison the regional average for South Asia was 1,075 days to enforce a contract and cost 27.2% of the claim value.

It appears that the amount of time it takes for the ‘trail and judgment’, when a business seeks the help of courts to enforce a contract, is driving the poor rank. Even in the world’s easiest place to do business in, New Zealand, it costs 27.2% of the cost of claim to enforce a contract through courts. However it takes only 216 days, less than 1/5th of the time it takes in India according to WB’s Doing Business Report 2013.

Dealing with Construction Permits was the second most poorly rated benchmark as it took an average limited liability company 34 procedures and 196 days to set up a warehouse in Mumbai. India’s ranking seems to have taken a hit because of the number of procedures and steps involved in getting a permit.

As per the report, a typical application for setting up a warehouse in Mumbai would involve having at least 8 site inspections and, requesting and obtaining 7 NOC certificates from different authorities. This is apart from many other steps involving interaction with BMC officials for applications, proposals and approvals.

Starting a Business in India [Time, Cost & Procedures]

starting a business

The ease of Starting a Business, was the third worst benchmark for India. According to WB’s Doing Business Report 2012’s data, it takes 12 procedures online and offline, and 27 days to start a business in India. The procedure involves registering company name with Registrar of Companies, paying stamp duties, obtaining tax account numbers and registering for VAT among other formalities. Starting a business in New Zealand takes 1 step and 1 day.

It should be noted that Doing Business Report 2012’s data is based on one city alone, Mumbai. The study is not reflective of the entire country and is also based on a host of other assumptions including that the data is for a limited liability company of a specific size only. These assumptions make comparisons murky when it comes to in-practice situations.

Besides the big ticket reforms, India Inc is moving ahead progressively. IT adoption in governance, public and private sector is changing the face of the business environment of the country. States like Gujarat, AP and Karnataka have seen a flurry of economic activities.

WB’s report also noted how multiple reforms in the last 5 years have made doing business in India easier. These include reducing time required to get construction permits, electronic filing of taxes, online VAT registration system, increased efficiency in insolvency procedures, reduction in export time, online lodgement of custom declaration via ICEGATE and a central electronic registry among many others.

  1. […] Management and staffing, corruption and ethics, cultural barriers and bureaucracy were cited by CFOs as some of the top risks associated with investing and doing business in India. Bureaucratic hurdles such as getting permits and clearances were also noted as some of the top barriers faced by businesses in India according to World Bank’s Doing Business Report 2013. […]

  2. Residential property in Agra says

    Hi, Kaushambi you are right,I am agree with you what you have defined in your post by giving following data and facts When it comes to accessing and availing credit for businesses, India ranks 1st in South Asia and is among the top 25 countries in the world, according to WB’s Doing Business Report 2012. A reform involving creating a central and unified electronic registry of debtors has aided availing business credit in India.

Leave A Reply

Your email address will not be published.

who's online