Doing business gets easier in India, but not much

NEW DELHI: Continuing economic reforms have cemented India's position on the global arena, especially when it comes to cross-border trade, but the country still lags behind a number of other nations in terms of ease of doing business, according to a new report by the World Bank.

India has been ranked at 120th position, up 12 positions from last year, in the 'Doing Business 2008' report released by the World Bank and its private sector lending arm IFC on Wednesday.

Neighbouring countries like Bhutan, Nepal, Pakistan, Sri Lanka and China, as well as lesser known places like Tonga, Ethiopia, Mongolia, Ghana, Antigua and Barbuda have been placed at higher ranks than India in the list, which is topped by Singapore for second consecutive year.
   
Singapore is followed by New Zealand, US, Hong Kong, Denmark, UK, Canada, Ireland and Australia in the top 10 countries in terms of ease of doing business.
   
Other major countries where doing business is relatively easier include Japan, Thailand, Switzerland and Germany.

However, India has been ranked as the top reformer worldwide for trading across the borders. In terms of overall economic reforms, Egypt has been ranked at the top position, followed by Croatia, Ghana, Macedonia, Georgia, Colombia, Saudi Arabia, Kenya, China and Bulgaria. India does not find place in this list.

The report noted that South Asia picked up the pace of regulatory reform over the past year to become the second-fastest reforming region in the world, on par with the speed of reform in the OECD countries.
   
Last year, South Asia was ranked lowest on the rate of reform, while this year two-thirds of the countries in the region had effected at least one reform, it said.

"The pickup in reform was led by India, which rose 12 places on the ease of doing business and made the reform of business regulation a policy objective.," the report said.

Bhutan and Sri Lanka are the other top reformers in South Asia this year. Bhutan introduced the country's first fundamental labour protections. Sri Lanka made it easier to start a business and to trade across borders.

The top countries in South Asia were Maldives (60) and Pakistan (76). India achieved a bigger gain than China, which rose by nine places to 83rd among a total of 178 economies.
   
In all, 200 reforms across 98 economies were introduced between April 2006 and June 2007.

The report finds that equity returns are highest in countries that are reforming the most, World Bank/IFC vice president for financial and private sector development Michael Klein said.
   
Investors are looking for upside potential and they find it in economies that are reforming regardless of their starting point, he added.

The report noted large emerging markets were reforming fast with China, India, Malaysia, Vietnam and Egypt improving their rankings for the ease of doing business and due to regulatory reform, more businesses were starting up.

"Besides making it easier to trade across borders, India increased access to credit by expanding credit bureau coverage to individuals as well as businesses. It also introduced an electronic registry for security rights granted by companies," the report said.

In an interesting observation, the report said that higher rankings on the ease of doing business were associated with higher percentages of women among entrepreneurs and employees.
   
The benefits of increased regulatory reform are especially large for women, the report's author Melissa Johns said. Women often face regulations that may be aimed at protecting them. But the effect is counterproductive, forcing women into the informal sector, where they lose out on job security and social benefits," she added.

The rankings were based on 10 indicators of business regulation that track the time and cost to meet government requirements for business start-up, operation, trade, taxation, and closure. The rankings, however, do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates, IFC said.