The Doing Business 2014 report released by the World Bank this week ranks India a dismal 134 among the 189 countries surveyed. This report is an annual study by the World Bank on the regulations that enhance business activity and those that constrain it. India ranks behind even countries such as Rwanda (32), Tunisia (51), Ghana (67), Sri Lanka (85), Namibia (98), Nepal (105), Pakistan (110), Swaziland (123) and Bangladesh (130).
The study surveys regulations affecting areas of the life of a business in each of the 189 countries. The index is a noteworthy measure since regulation is a reality from the beginning of a firm’s life to the end. India’s miserable rank implies that navigating regulations for our new firms is complex and costly. On average in India, starting a business takes 12 procedures, 27 days and costs 47.3% of income per capita in fees. In contrast, it takes as little as just one procedure, half a day and almost nothing in fees in New Zealand.
And this is just the tip of the iceberg. Consider what a new firm in India must go through to complete other transactions at the average level of time and effort required. Preparing, filing and paying the firm’s annual income tax could take up another 243 hours—more than one-man month of staff time. Exporting just one shipment of a new firm’s final product would take 9 documents, 16 days and would cost more than R70,000. If the firm needs a simple warehouse, getting the facility ready to start operating could take 47 procedures and 279 days more—to get construction permit would take 35 procedures and 168 days, to buy the land and register its ownership would take 5 procedures and 44 days, getting electricity would take 7 procedures and 67 days, not to mention other utility connections such as water supply which the survey does not measure.
Having sorted out these initial formalities, if the firm becomes embroiled in a legal dispute with one of its suppliers or customers, resolving the dispute could mean being stuck in various levels of Indian courts for more than three years and ten months, on average. On top of that, the cost of being stuck in these courts would amount to nearly 40 paisa for every rupee of claim.
To operate and expand, the firm will need financing—from shareholders or from creditors. Raising money in the capital market is easier and