The World Bank releases its “Doing Business” rankings once every year wherein it ranks countries on an aggregate of their scores as to how long it takes to register for a business or how easy it is to pay taxes over there. We have been covering this report for 6-7 years now, and unfortunately, rather than improving, sadly India is deteriorating further.
The latest report released by the World Bank on Tuesday places India at No. 142, just ahead of the war battered economies like Palestine, West Bank and Gaza, out of a total of 189 countries. This is fall of 2 ranks compared to last year.
Here is how India ranks on various parameters of Doing Business:
On a global level, Singapore was placed at the top of the rankings. Other countries which got a mention in the Top 10 list include New Zealand, South Korea, United States, United Kingdom and Australia.
The huge economic giant, China, was placed at a not-so-enviable No. 90. Other Indian neighbors were marginally better with Sri Lanka being placed at 99, Nepal at 108 and Pakistan at 128. Only Bangladesh at 173 and Afghanistan at 183 were behind India, as if that is some consolation!
The methodology used for ranking has always been a debatable issue. It has also, at times, created tensions between the bank and its member countries.
Though the World Bank on its part asserts that their rankings “offer an unvarnished assessment of economies’ relative standings in the world when it comes to bureaucratic barriers to business,” the countries languishing at the bottom of the table have raised question marks about their reliability.
The most vocal on this front has been China. Undoubtedly one of the major influencers on the business scene globally, the economic giant was so miffed with being placed at No. 90 persistently that it tried to ‘kill’ the rankings altogether in 2013.
Keeping in view the grouses of the member countries and adopting the recommendations of a 2013 review, the methodology for the rankings 2015 has been changed.
The changed methodology has made little difference, if at all, to both the Asian behemoths and they still have to go a long way to work their way to the top of the table, to reflect favorably on their business friendly atmosphere.
India’s rankings were bad because it did badly on all parameters laid by the governing body, except three:
- Though starting business in India has been made cheaper by reducing the registration fee, it has also been made a tardier and long-drawn process, thanks to a new declaration that new businesses will be required to make.
- Managing to get a power connection in two of India’s major commercial hubs, Mumbai and New Delhi, has also become cheaper as the security deposit required for the purpose was slashed.
- Besides that, measures have been initiated to protect the interests of minority investors by trying to make boardroom proceedings more transparent and also safeguarding the interests of shareholders in privately held companies.
India too, like China, has not been very happy with the Doing Business reports released by the World Bank but there is no doubting that a lot remains to be done to make doing business in India easier.
While getting a power connection in Singapore (the no. 1 placed country) takes upto 31 days on an average, doing so in India might take upto 105 days. Now, that is a HUGE difference, admittedly!
Similarly while it takes 4.5 days to register for a new property in Singapore, it takes 47 days in India.
Resolving insolvency which takes a maximum of 10 months in the tiny speck of that island nation could take upto 4.3 years in India.
Much is being said about India being only marginally ahead of war ravaged economies like West Bank and Gaza. But the size of a nation and its political turmoil should not be the benchmarks with which you judge the ease with which a new business can be set up.
Singapore, for that matter, is barely visible on the World map. It continues to figure at the top because of the wonderful infrastructure, friendly laws and keeping the investor interest in mind above everything else.
Being placed behind Nepal and Pakistan can be a contentious issue though.
Before questioning the methodology or credibility of the rankings, there is a lot of introspection to be done as to why we continue to be placed at the position we find ourselves in at present.
Check out World Bank’s India report
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Hmmmm…. Altaf Rahman I really like your analysis and Observations because you really pinpointed them out and these kind of attitude from the Government can never allow Growth whatsoever but like the case has always been, maybe they just gave it to India because of their self Interest in the giving or maybe a Political Ambition.
Lets think from out side to inwards. Suppose you are a businessman with bags full of money and a pet project. You want to set shop. Where will you go? You go to the most friendly place.
Though it hurts to see the rankings, we have to accept the facts.
Let me give few cases. Put yourself into the companies and see how you feel.
POSCO, the South Korean Steel gaint wanted to invest in India and Indian govt was happy because the project was huge with lots of foreign investment and potential for lots of jobs. What happened? Since last 10 years POSCO is running from pillar to post to get land, to get environmental clearances, to get iron ore supplies, coal supplies. Suppose if you are POSCO what will you do? Go spme place. Afterall 10 years is a long time to be able to start business.
Take Vodaphone case. They bought the share of Hutch in telcom business. When a party is selling an asset, it has to pay tax. Our IT dept was sleeping when the transaction took place. After few years they realized that Hutch has taken money and left India. What should happen? Heads should roll in IT Dept.
But what is happening? Without shame IT Dept is claiming the tax dues from Vodaphone. The case has gone to the court. The highest court Supreme Court also gave verdict in favor of Vodaphone that they are not responsible. Still the govt (at that time Pranab Mukharji was FM) do not want to leave Vodaphone alone. Upto now govt is harassing them. Suppose if you are Vodaphone what will you do? You will tell all your friends never to deal with India.
Take coal scams case. Without going into minute details, Govt for the last 20 years is allotting coal mines to companies. They have some criteria. Whether favors were shown, whether bribes are involved is regardless. After a commitment is made, after 20 years govt declares that the allotment is not valid.
What signal this sends to foreigners? If you invest in India, even after 20 years, govt can confiscate your investment on any reason.
Take 2G scams. First licences are allotted, later they cancel all licences and again auction them. What signal does it send?
Now consider a small country like Thailand. You take one licence for business, you can to 20+ types of business on the single licence. No need to have different licence for barber shop / grocery / restaurant / internet café etc.
Inspite of our huge size, capable people, if our rankings are so low 142th out of 189, what do you think?
We don’t deserve such rankings.
Just my two paisa :)