BackWorld Bank’s Doing Business rankings: what India should focus on
Irrespective of whether India's ranking is 150 or 80, there will be countries that want to do business in the country
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The World Bank’s Doing Business 2016 rankings are out and there is news for both India and Singapore.
Singapore is, once again, the first among the 189 countries covered. India is 130th, up from 134th in the previous edition of the study.
Singapore’s Distance To Frontier, or DTF, score is 87.34; India’s is 54.68. This represents the room for improvement on a scale of 100. The World Bank doesn’t mention it explicitly in its methodology, but I sense that DTF is not a linear scale. Moving from 85 to 87, for instance, is likely to be tougher than moving from 56 to 62.
The Doing Business rankings are important enough for India’s National Democratic Alliance government to have deputed two senior bureaucrats to work with the World Bank on improving India’s position; but like all other country rankings, they have to be seen in the context of the big picture.
And that big picture has to do with such things as the size of the market, the sophistication of customers, and the availability of human resources. Irrespective of whether India’s ranking is 150 or 80, there will be countries that want to do business in the country. That probably explains why India attracted the most foreign direct investment in 2014, according to a study by the Financial Times.
Still, a better rank, the result of policy measures that make it easy for companies to do business in India, should help the cause of investment, economic growth, exports, even job creation.
So, what should India focus on?
Although India is ranked 155 in terms of how easy it is to start a company, the country’s DTF score on this parameter is 73.59. Increasing that will be more difficult than increasing the DTF score of 32.47 that India has for the ease of obtaining construction permits. The country is ranked 183rd in this parameter.
It has an even lower DTF score for the ease of enforcing contracts (32.41, and it is ranked 178th on this), and a marginally higher one (32.59) for the ease of resolving insolvencies (it is ranked 136th).
These are the three dimensions where India can achieve the most in a limited span of time. Indeed, some recent moves by the country’s government to create a bankruptcy law and ease arbitration proceedings should be seen in this context (and will probably have a bearing on next year’s Doing Business rankings).
Foreign investors who have minority stakes in Indian companies—the list includes portfolio and strategic investors, minority joint venture partners, and venture capital and private equity firms—can take heart from India’s ranking of eight in terms of the protection of minority shareholders. That is probably a function of the quality of securities legislation and regulation in the country.
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