The Hindu Business Line : `It's difficult to do business in India'

HOW easy or difficult is it to start or pursue a business? International Finance Corporation (IFC), the private sector arm of the World Bank Group, puts India way down at 116 out of the 155 countries surveyed for its report, `Doing Business 2006' released worldwide today.

Twenty-five notches below China, which has a 91 ranking, India has been ranked below all South Asian countries except Afghanistan, in the overall ease of doing business. Though the country has climbed eight places higher from its position last year, it is still heavily burdened with procedural and regulatory obstacles.

The report, which uses January 2005 data for its set of indicators, takes into account regulations and reforms using parameters such as degree of regulation, tax compliance, time and cost to enforce a contract, legal protection of property, labour flexibility, investor protection and ease of trade across borders.

According to the report, India is way down even in the South Asia list when it comes to crossing the first hurdle faced by entrepreneurs — entry regulations such as cost and time of registering a new firm and obtaining procedural licences. In India, it would take around 71 days to start a business as compared to Pakistan with 21 days, Maldives with 12 days and Sri Lanka with 50 days.

Obtaining a licence would take the longest in India in the South Asia region. Compared to around 270 days in India, in Pakistan it would take 218 days and in Sri Lanka, 167 days. Maldives processed licences in the least time at 131 days. France takes the least time at 56 days, while in New Zealand and Denmark entrepreneurs face the least procedural hurdles.

An Indian entrepreneur is also required to submit 15 documents and get 21 signatures if he or she is planning to import goods.

In the Rigidity of Employment Index too India scored as the most rigid in the region, while Maldives was the least rigid. Pakistan came two notches above India.

Pakistan, in fact, has been ranked 60 in the overall report and placed among the top 10 countries that have implemented reforms.

In the procedure and time to register a property, which the report views as an incentive to invest and facilitate trade, India is in the top four in South Asia, though Pakistan again outscores India.

However, the report notes the reforms that India has put into place in the past year. "Stamp duties for registering property were halved from 10 per cent to 5 per cent, with revenues increasing because of better compliance," it says.

The report also points out that India "significantly improved the process of enforcing collateral agreements with a new summary judgement procedure that requires only minimum court involvement. In some cases, time to enforce fell from 10 years to 6 months. A new consumer credit bureau was launched, making it easier for lenders to evaluate creditworthiness."

However, the report does not track variables such as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions or crime rates.

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