Column: Doing business index a wake-up call

Nov 04 2013, 17:50 IST
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SummaryAs the World Bank report highlights, India is way behind its potential for creating a good investment environment

The World Bank ‘Doing Business’ ranking is controversial because all those countries rated in the lower order do not like it and feel that the methodology is suspect. However, based on a relatively objective criterion, the World Bank ranks countries on how easy it is to start and close a business and traverses through a set of 10 parameters. The latest report for 2014 is quite timely given the uncertainty on the economic front and, in a way, is a revelation as we get to know where we stand.

There have been several discussions on the myriad issues relating to delays in getting papers moving and consequently, delays in getting projects started on account of an impasse at the decision-making level. Quite clearly, a domestic investor knows that there are issues here when it comes to clearances. There is also flip-flop on policy when it comes to FDI as that means going through Parliament. Even if these concerns are kept aside, how do we fair in the ordinary course of business life?

India’s rank comes down by three notches from 131 to 134 in a set of 189 countries. This is significant for two reasons. The first is that we are moving down the echelon which will affect our own long-term attractiveness for investors. The second is that we are placed even lower than countries like Bangladesh, Kenya, Honduras and Egypt. Also, while we do like to compare ourselves with the others in the BRICS group all the time, India is placed uncomfortably low in the list. South Africa leads at 41, followed by Russia at 92, China, 96 and Brazil at 116. This relative scale is certainly not something to be proud of and the fact that there is a downward movement indicates that we need to address these issues, else we would be the outlier in the BRICS group.

The picture is also quite disappointing if one considers the individual ranks across the 10 parameters. We do very well on two counts, which have helped to keep our ranking where they are. The first is access to credit, where we are placed at 28, and the other, in terms of protecting the investors, we are placed at 34. Quite clearly, the financial sector is our strength, and the credit should go to Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) for keeping us ahead

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