India managed to halve the time it takes to start a company, to 35 days, in 2006. But that wasn’t enough to prevent the country slipping 18 spots to 134 in a World Bank ranking of 175 countries.
India ranked 116 in the Doing Business study last year, when 155 countries were covered. The annual exercise rates countries on 10 indicators related to the ease of doing business in them, from tax rates to time and cost of registering property.
Singapore comes in at No. 1. The United states is at No. 3. And even Vanuatu ranks ahead of India, at 58.
In a subsidiary study, Doing Business in South Asia, the World Bank compares eight Asian nations with 167 others. The Maldives and Pakistan both rank ahead of India.
India ranks 41 places behind China, although the World Bank admits that the country was the leading reformer in South Asia in 2005-06.
The rankings are controversial because most multinational companies believe that India and China (ranked 93) are two countries they cannot avoid being in, if only to tap the large domestic markets in both. Several of these firms have also discovered that both countries make good manufacturing hubs (China is ahead of India on this).
The lure of a huge domestic market, and an opportunity to serve global markets out of these countries means that most companies and investors are willing to go through the considerable trouble of doing business in them.
The South Asian study also rates 12 Indian cities on the 10 parameters. It finds Hyderabad the best city to do business in the country, followed by Bangalore and then, Jaipur. Delhi is at a poor eighth and Kolkata comes last.
S.K. Rao, director, Administrative Staff College of India, lists four reasons for Hyderabad topping the list, apart from governmental cooperation: the relative ease with which land can be acquired by business; the large number of technical institutions that produce adequate skilled manpower; the average entrepreneur’s ability to tackle risks; and the flow of money into high-quality technical services such as information technology, research and pharma.
The study found that it is easiest to start a company in Mumbai. But it also discovered that in doing this, the company increased the cost required to start a business. It takes longer to start a company in Chennai, but costs much less.
According to the study, the time taken to register property is the lowest in Hyderabad. It takes only 35 days to register a new house in Hyderabad (but it takes 10.6% of the value of the property to do so); the corresponding numbers for Mumbai are 62 days and 7.8% of property value.
Another of the study’s findings says that it is easiest to trade out of the southern port city of Chennai. According to it, traders can import products into Chennai in 22 days on an average and export products in 17. Mumbai, again, performs badly on this count. The study says that it takes 27 days to export products in the city and 41 days to import them. The study claims that large business centres such as Mumbai have a high volume of business activity resulting in more regulatory bottlenecks, more congestion, and the consequent delays.