India is difficult to do business in, but safe for shareholders

While India’s record in protecting minority shareholders has improved, it has slipped two places in the Doing Business index.

According to a report by the World Bank Group and released on Tuesday in Washington, India ranks 142, while Singapore remains the best place to do business.

India was originally 134 in the group of 189 countries, but in 2014 fell to the 140th place in the revised ranking.

But in terms of protecting minority shareholders, India is in the top 50 nations in two categories: protecting minority shareholders and credit availability. It moved up to the seventh rank from 21 in terms of protecting minority shareholders, ahead of countries such as the US, Japan, France and Germany in a list topped by New Zealand.

However, India has dropped to the 36th place in the ranking from 30th in credit availability.

“India strengthened minority investor protections by requiring greater disclosure of conflicts of interest by board members, increasing the remedies available in case of prejudicial related party transactions and introducing additional safeguards for shareholders of privately held companies,” it said. The World Bank report on Doing Business highlighted key issues for India including starting a business and getting electricity.

Though, the report appreciated that India made starting a business easier by considerably reducing the registration fees, it also made it difficult by introducing a requirement to file a declaration before the commencement of business operations. These changes apply to both Delhi and Mumbai. In terms of getting electricity, the report said that the utility in Mumbai made getting electricity less costly by reducing the security deposit for a new connection.

Govt target The Modi regime aims to put India among the top 50 nations for ease of doing business. Accordingly, it is going for key reforms, including in the labour sector. However, they will take some time to reflect on performance.

CII reaction Commenting on the report, Chandrajit Banerjee, Director-General of the Confederation of Indian Industry, said that in spite of the drop in ranking, India’s performance has improved over the last year.

“However, the performance of the other countries has been better and therefore, India has dropped in ranking in spite of an improved performance score. However, more importantly, the actions taken by the new Government have not been factored in the report as the data has been analysed till June 2014,” he said.

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