Hurdles in the way

Updated: Sep 28 2007, 05:19am hrs
India has improved its World Bank ranking on one globally watched chart: ease of doing business. The country has actually risen to No 120 in 2006-07, up from No 138 in 2004-05. The mood in the country may be euphoric for an assortment of reasons at the current moment, but business being a field of rational assessments, this gain is certainly not a cause for celebration. India, which now boasts of two of the worlds five richest businessmen, is still not amongst the top 100 on the chart. And this is not just because competing countries have done wellChina, for example, is up 25 notches to No 83it is because India is a difficult place to do business in.

The barriers are mainly administrative or governance-related, but they do exist. Whats worse, many of them require legislative action to get rid of, and in an era of coalition politics, that means these man-made hurdles tend to look like permanent parts of the business landscape. Some of them are even becoming bigger. For instance, the number of procedures for enforcing a contract has more than doubled from 22 to 46, and the time taken has shot up from 365 days to 1,420 days over the last four years. This is one specific indicator on which Indias ranking has actually fallen. And the experience has been similar in the case of other indicators like ease of starting a business, registering property, paying taxes, enforcing contracts and closing a business. Improvements have been recorded in areas like dealing with licenses, employing workers, getting credit and trading across borders. While the licence-related easing is on account of reduction in time taken, the ease of employing workers has been helped by a decline in employment rigidity. Getting credit has been made easier by a strengthening of legal rights and the depth of credit information indices. The extension of coverage by private credit has helped, too. On the external trade front, documentation procedures have reduced. For all this, the overall scenario remains dismal by world comparison. If it is any consolation, India has fared better than China on as many as sixstarting a business, dealing with licenses, employing workers, getting credit, protecting investors and paying taxeswhile China is ahead on registering property, trading across borders, enforcing contracts and closing a business.