Doing Business in India tougher than Pak, Bangla, Nepal

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.

“There are a large number of issues that tend to make foreign firms wary when coming to India, such as labour laws. With these laws staying rigid, the economy is slowly heading towards ‘informalisation’ of labour, or the gradual reduction of long-term employment contracts,” points out D K Joshi, principal economist, CRISIL. The Doing Business report notes that the costs of firing an employee in India amount to 56 weeks’ wages.

Another potential area for reform is property registration, where India is ranked at 112. It takes, on an average, two months to transfer property and costs 7.7 per cent of India’s gross national income. In China, it takes just half the time and cost.

Despite India’s largely unimpressive overall ranking, there remain some key parameters where India has shown a marked reformist mindset. On credit off take and availability, the country’s rank jumped 26 places to settle at the 36 th spot. Similarly, a pro-reform trade policy has more than halved the time taken to export and import goods to India, leading to an improvement in rank from 142 last year to a healthier 79 this year.

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