How not to do business

The World Bank has produced its Doing Business (DB) indicators for 2009 and India is 122nd out of 171 countries, slipping two ranks from 2008. We are just below Nepal and just above Lesotho, an enviable position to be in. Within South Asia, India performs better than only Bhutan and Afghanistan. To rub salt into the wounds, it isn’t just Maldives at rank 69 or Sri Lanka at 102. Pakistan is ranked 77 and Bangladesh 110.

The DB exercise quantifies and measures procedures in 10 stages of a business’s life — starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. It takes 13 procedures and 30 days (1 day in New Zealand) to start a business in India and costs of starting a business are 70.1 per cent of per capita income. Twenty procedures and 224 days (34 in Korea) are required for construction permits and costs are 414.7 per cent of per capita income. The rigidity of the employment index (low is good) is 30 in India (0 in Hong Kong) and firing costs are 56 weeks of wages. Six procedures and 45 days (2 in New Zealand, 5 in Nepal) are required to register property in India and costs are 7.5 per cent of property value.

For getting credit, India scores 4 (high is good) on a credit information index (New Zealand is 5) and 8 on a legal rights index (Malaysia is 10). India scores 6 on an investor protection index (high is good), New Zealand is 9.70. India requires 60 tax payments a year (2 in Sweden) and 271 hours per year (59 in Luxembourg) are spent in paying taxes. Tax rate is 71.5 per cent of profits in India and 8.4 per cent in Vanuatu. Eight export documents are needed in India (2 in France) and 17 days are required to export (5 in Denmark). Cost of exporting is $945 per container ($450 in Malaysia). Nine import documents are needed in India (2 in France) and 20 days are required to import (3 in Singapore). Cost of importing is $960 per container ($439 in Singapore). Forty-six procedures (20 in Ireland) and 1420 days (150 in Singapore) are required to enforce a contract in India and costs are 39.6 per cent of claim (6.2 per cent in Ireland). Ten years are required for insolvency proceedings in India (0.40 in Ireland), cost of insolvency is 9 per cent of estate value (1 per cent in Singapore) and recovery rate is 10.4 per cent (92.5 per cent in Japan).

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