With the global economy far from booming, India’s rising costs of doing business are problematic
A rising tide, as the saying goes, lifts all ships. It’s when it goes out that there’s a problem as India is now realising. When the global economy was doing well, the costs of business in India mattered less since there was always arbitrage opportunity in coming and investing in India. Today, with wages rising across the board, the picture looks different. To be sure, there are large pockets where India has an advantage, Mylan’s $1.8 billion takeover of Agila is the most recent example of this. But in the lower tech areas, if the costs of doing business rise, India will lose the opportunity—sadly, this is also the area where employment is probably the highest.
The World Bank’s Doing Business indicators, unfortunately, rank India a poor 134 out of a total of 189 nations. And this rank is three notches down from last year’s ranking. Even more worrying, given that the world’s most innovative technologies come from start-ups—think Microsoft some decades ago, think Google and Facebook now—what is even more problematic is that India is ranked 179th in terms of starting a new business, again down two ranks from last year. India ranks 186th when it comes to enforcing contracts and it is of little consolation that this problem dogs both large and tiny businesses. If starting businesses isn’t time consuming enough, other studies point to how much of management time gets wasted in dealing with just procedures, a killer for SMEs especially. Sadly, this very important area gets very little attention.