India continues to be among the most difficult countries to do business in, according to a World Bank-International Finance Corporation (IFC) study titled ‘Doing Business 2013’. Among the 185 countries where the study was conducted, India ranks 132nd in terms of ease of doing business, while Singapore remains at the top for the seventh year in a row.
Compared with the report published by the agency last year, India’s ranking deteriorated on seven of the 10 parameters in 2013. The parameters on which the country’s ranking slipped were starting business, dealing with construction permit, getting electricity, protecting investors, paying taxes, trading across borders and enforcing contract. India, however, managed to climb up the order on three counts - getting credit, registering property and resolving insolvency - over the year.
India lagged even struggling neighboring economies like Pakistan, Nepal, Sri Lanka and Bangladesh. Sri Lanka - where it takes just 19 days to start a business - ranked 81st, while Nepal ranked 108th, Pakistan 107th and Bangladesh, three notches above India, 129th.
Among BRICS nations, India’s ranking was the lowest. While South Africa was ranked 39th, China stood 91st, South Africa 39th, Russia 112th and Brazil 130th. The World Bank-IFC report, however, lauded India for the consistent improvement shown by it since 2005 by simplifying and reducing cost of regulatory processes.
The ‘Doing Business 2013’ report noted that India had reduced the time required to obtain a building permit by establishing strict time limits for pre-construction approvals.
It added that it took 27 days through 12 procedures to start a business in India, compared with China’s 33 days through 13 procedures. However, India ranks 173rd in starting a business, against China’s 151st, due to the low cost involved in starting a business in that country. In India, the average cost of starting a business is 49.8 per cent of the country’s per-capita income, while in China it is just 2.1 per cent of per-capita income. The minimum capital to start a business in China is about 85.1 per cent of its per-capita income, while in India it is 140 per cent.
Confederation of Indian Industry Director-General Chandrajit Banerjee said the time for getting approvals and doing business would get streamlined and less cumbersome if the clearance procedure was made electronic.
India and China have been the only two among BRIC members to rank in the top-50 improvers since 2005.
“Both implemented regulatory reforms, particularly in the early years covered by ‘Doing Business,” the report says.
After establishing its first credit bureau in 2004, India focused mostly on simplifying and reducing the cost of regulatory processes in areas like starting a business, paying taxes and trading across borders, said Augusto Lopez-Claros, director, global indicators and analysis, World Bank Group.
“India implemented strict time limits at the municipality level for processing building permits,” the report said.
However, so far as dealing with construction permits is concerned, India’s ranking slipped one notch to 182nd from 181st last year.
The report said, it took 67 days through seven procedures to get electricity in India, which ranked 105th on this count. In terms of dealing with construction permits, India took 196 days through 34 procedures and ranked 182nd. However, India has been named among the countries that reduced time for processing permits in 2011-12.
This year, the report saw India, where it takes 1,420 days to enforce a contract, as the second most difficult country on this parameter and ranked it 184th.
The report cited a study that said simpler entry regulation and labour market flexibility led to better growth in Indian states. The number of companies in the informal or unorganised sector decreased and real output grew in states, compared with those countries that had less flexible regulations.
Another study that was referred to concluded that the establishment of specialised debt recovery tribunals in India had a range of positive effects, including speeding up the resolution of debt recovery claims, allowing lenders to seize more collateral on defaulting loans, increasing the probability of repayment by 28 per cent and reducing interest rates on loans by 1-2 percentage points.