September 14, 2005

Doing biz in India worse than in Iraq

Despite gung-ho growth rates in the Indian economy, it’s a sign of how much still remains to be done when India ranks two places behind Iraq on the ease of doing business, at a lowly 116 of the 155 countries surveyed in the World Bank’s ‘Doing Business in 2006’ report released on Monday. China ranked much higher at 90 and Pakistan was even further ahead at 60.
   India did make significant gains on certain parameters, such as collateral recovery and ease of registering property, but on most of the other fronts India still fares quite poorly compared to the rest of the world.
   New Zealand has the most business-friendly regulation in the world, and Singapore comes in second. Apart from Singapore as many as five Asian countries figure in the top 30 — Hong Kong, Japan, Thailand, Malaysia and Korea. Countries were evaluated on 10 broad parameters, such as how tough it is to start a business and to get licences and credit.
   A benchmarking for the South Asian region indicates that India lags behind most countries on almost all counts. Starting a business in India requires 11 procedures, the highest in the region, as well as the most time at 72 days, according to the report. Again, on procedures to obtain a licence, business in India requires 20 procedures, second only to Bhutan’s 26, and requires the most time at 270 days.
   The ‘rigidity of employment’ index, which relates to difficulties in hiring and firing workers, ranks India as 62 on an index of 100, by far the highest in the region. India fares better on the good governance index, ahead of most countries except Bangladesh and Pakistan, but not on the time taken for imports and exports, which has been estimated at 43 days and 36 days respectively by the report.
   It also estimates that as many as 40 procedures and a whopping 425 days are required to enforce a contract in India, while taxes must be paid an incredible 59 times during the year, requiring 264 hours to pay those taxes. And if a business goes bankrupt, that isn’t quite the worst news.
   The report says that it takes as long as 10 years for a company to go through insolvency, compared to a global-best 0.4 years in Ireland and 2.2 and 2.8 years in Sri Lanka and Pakistan, and the recovery rate for bankrupt businesses is also estimated to be abysmally low at oneeighth of the total value.
 

1 comment:

Paco said...

Thanks for picking up on the index! If your reader's want more, I would suggest they check out:

PSD BLog, http://psdblog.worldbank.org/

Or this online discussion about the index, http://rru.worldbank.org/Discussions/topics/topic68.aspx

We would love to hear what they think about the report.