India slips to 133 spot in doing biz index

India slips to 133 spot in doing biz index
The Financial Express, September 10, 2009, Page 2

Chennai

India’s global ranking in terms of doing business declined to the 133 position in 2010, a notch lower than in 2009, according to the report Doing Business 2010: Reforming through difficult times, published by the International Financial Corporation and the World Bank.

India’s ranking has slipped on account of the deterioration in parameters like starting a business, obtaining credit and investor protection.

It has, however, improved its score on the “closing a business” indicator by taking steps to ease resolution of insolvency cases— a critical area in times of crisis.

On the parameter of starting a business, India fell by 3 positions to 169th position. The parameter is based on time, cost, procedures and paid-in minimum capital.

The economic crisis could not affect reforms in business regulations in South Asian economies with most of them making the process more efficient and creating more opportunities for local firms. Six of the eight economies in South Asia saw reforms.

However, India’s record in the most recent compares favourably when compared to the other Bric countries though it still remains at the last ranking among Bric countries. This is because China fared worse with its ranking slipping 3 rungs to the 89 th position. Russia and Brazil also saw their ranking slip by 2 rungs to the 120 th and the 129 th position respectively.

India’s neighbours, except Afghanistan , have been ranked better in the index. Pakistan has been placed at the 85 position followed by Sri Lanka (105), Bangladesh (119) and Nepal (123). Nepal lowered property transfer costs. Pakistan made it easier to start a business by introducing an e-service registration system. Sri Lanka improved access to credit information to help expand access to finance.

“The quality of business regulation helps determine how easy it is to reorganise troubled firms to help them survive difficult times, to rebuild when demand rebounds, and to get new businesses started,” said Penelope Brook, acting vice president for financial and private sector development for the World Bank Group.

Bangladesh, South Asia’s most active reformer, implemented an online company registration system-cutting start-up time by nearly month-cut corporate income taxes, and expedited trade by introducing an automated customs clearance system at its main port.

On the parameter of getting credit, the India lost 3 notches over the previous year to the 30th rank.

Citing a recent research in India, the report said poor women in the rural sector have difficulty in gaining access to the formal financial system and their chances of engaging in entrepreneurial activity shows a strong increase when they are able to secure a loan.

Further, India showed deterioration on the front of protecting investors and fell by 3 ranks to 41st position.

“The current crisis has made access to equity markets more challenging. In times of uncertainty, investors become even more concerned about corporate governance risks and look for legal protections,” the report said.

Other parameters on which India was seen slipping were dealing with construction permits and employing workers.

When it comes to global scenario, a record 131 of 183 economies carried out business regulations between June 2008 and May 2009.

Singapore occupies the first place in the Doing Business 2010 report, which focused on “Reforming through difficult times.

It is followed by New Zealand, Hong Kong and the United States. Two-thirds of the reforms recorded in the report were in low- and lower-middle-income economies.