Now that does not sound very positive, is it? India touted as the next world super power is unfriendly to entrepreneurs who want to setup shop in India, so much so that war ravaged, terrorism prone, unsettled political economy like Pakistan ranks much above India. Doing business in India is tough…really tough !
World Bank has released the latest rankings for 2009 for doing business in several countries. India not surprisingly is languishing at a ranking of 122. This is a slip of 2 ranks from 2007.
That should not come as a surprise because it has been a while since India has gone through any major reforms. Other intriguing facts are all our neighbors (including Pakistan) of the sub-continent have done remarkably well. Sri Lanka has led the way in the sub-continent with some major reforms.
This report is extremely important because, FDI’s and private equity groups follow it carefully to park their investments. The main reason for India slipping is because most of the African nations have gone through major reforms and thus broke through the rankings.
India did not focus on any reforms since the report was published in 2008. Other factors for India’s downslide are the number of tax payments required by the companies and the inefficiency of court system to resolve any legal matters.
We have recently reviewed Forbes survey for doing business in India. World Bank survey focuses on 10 indicators which includes the time and cost involved to meet the government regulations to start, run and close a business.
The 10 indicators are:
- Starting a business
- Dealing with construction permits,
- Employing workers
- Registering property
- Getting credit
- Protecting investors
- Paying taxes
- Trading across borders
- Enforcing contracts
- Closing a business
However, all hope is not lost because a new bill to make doing business easier is already drafted and waiting to be presented in parliament. This new bill will deal with protecting minority share holder interests, the number of partnerships in a firm (increased to 100 from 20), reducing the norms required to starting and running a business to around 400 (this was double earlier) and also a ‘one person company’ which was not possible earlier.
Also, the free trade agreements (FTA) India has signed up recently with ASEAN should augur well for business in 2009 especially for ‘trading across borders’.
Once that bill is passed, I am expecting a significant leap in India’s rankings in coming years.