The latest study conducted by the International Finance Corporation ranks India 132nd among 185 countries evaluated in doing business. Among the 10 indicators that countries are ranked on, such as starting a business, investor protection, getting electricity and contract enforcement, India’s ranking slipped on six parameters. The report said that dealing with construction permits in India remains a cumbersome process with applicants having to comply with as many as 34 requirements. India also remains the second most difficult country to enforce contracts. For an economy of its size and aspirations, this can only be called a poor performance. Singapore retained its top spot while Sri Lanka was at 81, China at 91 and even the seemingly non-progressive Bangladesh at 129. With China having passed a new company law in 2005, its first bankruptcy law in 2007, a new property law in 2007, a new civil procedure law in 2008 and a new corporate income tax law in 2008, it ranked 12 among the top improvers while India ranked 127.
It remains undisputed that businesses create jobs, leading to higher incomes, higher taxes and high growth. However, if the conditions for doing businesses are not conducive, it is hard for an economy to move forward. In such conditions, inherent strengths such as a large and growing working age population and higher savings which India has, can’t be used optimally.
These numbers will have to change dramatically in the future if India has to return to high growth and if it is to generate jobs. Just opening a few sectors to foreign investment in the name of reforms will not do the trick. Forget grand ideas such as reforming labour laws and the like, India needs to undertake far more basic tasks to become a good place for doing business. The reforms at the Centre and in the states have to go hand in hand because while some clearances are at the central level, some others are handled in respective states. Corruption and bureaucratic red tape too need to be reined in.