Economics for Everyone: Building business in India - issues and indicators
The report which ranks the country on the basis of ease of doing business has placed Nepal above India at 121st position, Bangladesh at 110th place and Pakistan at 77th place in the overall ranking.
Prof. M. Guruprasad / 15:02, Oct 06, 2008
Issue:
India slipped two notches to 122nd rank, below neighbours including Nepal, Bangladesh and Pakistan in the 'Doing Business Report 2009' prepared jointly by the International Finance Corporation and the World Bank.
The report which ranks the country on the basis of ease of doing business has placed Nepal above India at 121st position, Bangladesh at 110th place and Pakistan at 77th place in the overall ranking.
Singapore retained the first place in ranking, which covered 181 countries of the world that provides quantitative measure of regulation for starting a business, getting credit, paying taxes, enforcing contracts and closing a business. Other nations move faster on reforms than India, says IFC and World Bank report.
Five of the top 10 economies implemented reforms that had an impact on the Doing Business indicators in 2007/08. Singapore further simplified its online business start-up service. New Zealand introduced a single online procedure for business start-up, lowered the corporate income tax and implemented a new insolvency act. Hong Kong (China) streamlined construction permitting as part of a broader reform of its licensing regime. Denmark implemented tax reforms. And entrepreneurs in Toronto, Canada, can now start a business with just one procedure.
For many economies the reforms captured in Doing Business reflect a broader, sustained commitment to improving their competitiveness. Among these systematic reformers: Azerbaijan, Georgia and the former Yugoslav Republic of Macedonia in Eastern Europe and Central Asia. France and Portugal among the OECD high-income economies. Egypt and Saudi Arabia in the Middle East and North Africa. India in South Asia. China and Vietnam in East Asia. Colombia, Guatemala and Mexico in Latin America. And Burkina Faso, Ghana, Mauritius, Mozambique and Rwanda in Africa.
How India scores in 2009 report
10 parameters used to evaluate economies
Ranking
(out of 181 countries)
Starting a business
121
Dealing with
construction permits
136
Employing workers
89
Registering property
105
Getting credit
28
Protecting investors
38
Paying taxes
169
Trading across borders
90
Enforcing contracts
180
Closing a business
140
India improved 16 places over four years
Year
Rank
2009
122
2008
120
2007
134
2006
138
Source: World Bank-IFC Doing Business Reports
Analysis
According to experts, India’s performance did not imply that doing business here had become more difficult. It meant that other countries on the list performed better in comparison. Infact, over the past four years, India has improved 10 slots in the aggregate rankings and that is a positive thing. It is things like the efficiency of the legal system that are dragging it down as per the study. Another reason for India’s decline is the addition of three more countries to the list this year. A country like India will be assessed in the context of whether other countries have reformed at a faster pace on the 10 parameters that are used to evaluate the ease ofdoing business.
In fact, the latest report recognises that regulatory reforms in South Asia continued this year, with four of the region’s countries – Bangladesh, Bhutan, India and Sri Lanka, easing regulatory burdens between
June 2007 and June 2008.
Indian government officials had pointed out that the findings of the report were based on small sample size. The latest report is based on a sample from India’s financial capital, a city faced with infrastructure woes.
Indicators of confidence
In addition to the policy challenge, a parallel study in India, which reflect the future business sentiment. This study is an annual exercise provided by the Economic Times.
The weakness in the global economy, rising inflation and India’s worsening fiscal deficit find a strong echo in the 65th round of the ETNCAER Business Expectations Survey (BES) conducted in July 2008.
The survey reports an across-the-board sharp fall in the Business Confidence Index (BCI) to a five-year low and paints a rather sombre picture for the rest of 2008.
The July 2008 survey shows an increase in the number of respondents who have a negative outlook on all the four major parameters measuring BCI, overall economic conditions, financial position, investment climate and capacity utilisation level.
There is a silver lining though, while the number of negative respondents has indeed risen, more than half of the total number of respondents continue to have a positive outlook. However, when it comes to perceptions about the investment climate, the number of positive respondents has fallen below 50%.
The latest round of the ET-NCAER Business Confidence Survey reveals a serious deterioration in India Inc’s sales and production forecast, along with a weak profitability outlook.
This is in contrast to the previous round of the survey, when sales and production forecasts were normal, and only the profit forecast was weak due to rising inflation.
The ET-NCAER BCI survey attempts to capture the business expectations of industry captains. It is computed using responses from a broad sample of companies spread across regions, sectors and sizes. The survey was carried out by contracted agencies and NCAER field offices in July 2008. The results are based on 487 responses.
BCI has been computed from responses to questions based on four parameters.
The first is regarding respondents’ expectations of overall macroeconomic conditions improving over the next six months. The second focuses on the respondents’ expectations about financial position of companies over the next six months. (Source: Economic Times)
Survey
Decrease
Increase 5%
Consumer Durables
Latest
5.4
37.5
57.1
Previous
1.7
61.7
36.6
Consumer Non-Durables
Latest
5.9
38.3
55.9
Previous
2.5
41.8
55.7
Intermediates
Latest
3.7
42.4
53.9
Previous
2.3
52.1
45.6
Capital Goods
Latest
4.9
50.0
45.1
Previous
0
44.6
55.5
Services
Latest
5.4
57.1