India may be achieving record FDI inflows and close to double digit economic growth, but it seems the buoyancy exists despite a poor business facilitating environment, not because of it. According to Doing Business 2008, the fifth report in an annual series by the World Bank and IFC, India ranks 120 among 178 countries on the basis of the ease with which it allows business to be conducted. Singapore, with its investor-friendly business policy, takes the top spot.

Although India’s rank has improved by 12 places since last year, the country still fares poorly compared to all of its smaller neighbours including Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives. Afghanistan, at 159, is the only country in the region to fare worse.

The key issues that contribute to an unfriendly business environment in India are an inability to successfully and speedily enforce contracts. “It takes almost four years to resolve a commercial dispute through the courts in Mumbai, compared with slightly over a year in Shanghai,” said Michael Klein, World Bank-IFC Vice President for financial and private sector development and chief economist at IFC.

The process of contract enforcement involves a long drawn out 46-step procedure, takes an alarming 1,420 days to complete and eventually ends up costing almost 40 per cent of the claim amount, leading to an abysmal 177 th rank on the parameter. On the ease of closing business, too, India manages a lackluster 137th spot. It takes 10 years to go through bankruptcy in India compared to less than two years in Shanghai.

... contd.