The Hindu Business Line : Franking boosts ranking

Doing business in India is not getting easier. Our rank in the World Bank's recent report `Doing Business 2009' (www.doingbusiness.org) is 122, a fall from 120 last year, in a list of 181 countries, ending with Congo. Among the countries ahead of India are Mauritius (24), Colombia (53), Pakistan (77), Kenya (82), China (83), Sri Lanka (102), and Nepal (121). It may be a consolation, though, that Brazil (125), Indonesia (129), Sudan (147), Iraq (152) and Afghanistan (162) are behind us in the tally.

The country's performance in the sub-indicators has seen a major fall, especially in `trading across borders' (minus 9), `starting a business' (minus 7, from 121 last year to 114 now), `dealing with construction permits' (minus 5), and `protecting investors' (minus 5).

"On the overall ranking, India went down by two places from 120 to 122, especially because other countries reformed more and moved up faster," says Ms Sabine Hertveldt of the Doing Business Project, IFC (the International Finance Corporation), Washington DC, speaking to Business Line over the phone, shortly after the release of the report.

"On one particular indicator, India moved up nine places: registering property. This was mainly due to introduction of franking machines," she adds, in the course of a subsequent email interaction.

Excerpts from the interview:

First, on the `franking' positive.

To reduce the logistics and avoid counterfeit of stamps, various States in India started the `franking' system. Franking machines have been installed at the office of Sub-Registrars and are also available at certain banks, authorised by the Government of Maharashtra.

The applicable stamp duty amount is paid in cash where the franking machine is located and, thereafter, the required denomination of stamp duty is embossed on the document to evidence the payment of stamp duty and returned to the applicant. This system speeds up the stamping process.

In addition, the Municipality has experienced greater efficiency in issuing the mutation of property title. The number of days to register property was reduced by 17 days, from 62 to 45 days.

How can India better its rankings? Your suggestions in this regard.

One, reduce delays in the courts, both to resolve commercial disputes and to go through bankruptcy - this would improve India's ranking both on `enforcing contracts' (180) and on `closing a business' (140).

Two, reduce the amount of paperwork associated with tax returns and reduce the frequency of payments of taxes, possibly by introducing online filing for `social security' contributions, Central Sales Tax, State VAT and Employee's State Insurance Contributions - this would improve the rank on `paying taxes' (169). And, three, simplify the process of obtaining a construction permit by reducing the time and cost.

In what ways do you expect the forthcoming city-wise ranking to be of help to Indian policymakers?

The `city-wise ranking', which will come up out as the Doing Business in India sub-national report in early 2009, will allow Indian policymakers to evaluate in which regions of India the businesses face the least and the most red tape. This will allow the cities that do less well to learn from the cities that do better and thereby improve their business environment.

The previous sub-national Doing Business study for India, released in February 2007, indicated that India (based on the situation in Mumbai) could jump overall on the aggregate rankings by 55 places by simply adopting existing `best practices' from other Indian cities on each of the individual topics.

D. Murali