Doing business for domestic companies has become easier this year, but the Union and state governments have to implement reforms before the business environment in India matches that of Pakistan and Sri Lanka, according to a study carried out jointly by the World Bank and the International Finance Corporation (IFC).
India was the top reformer worldwide in cross-border trading, said the findings of Doing Business 2008, a study that ranks 178 economies on the ease of doing business based on 10 indicators, including taxation. The indicators were measured between January and June this year.
India “made significant improvement in reducing amount of red tape,” Sabine Hertveldt, an author of the study, said in a telephone interview from Washington, DC.
The outcome of policy changes that eased the process of carrying out business in India is that the country’s overall ranking moved up by 12 places to 120. The improvement was not enough for India to catch up with the Maldives and Pakistan, ranked 60th and 76th, respectively, by the study.
The improvement in two areas, cross-border trading and access to credit, are responsible for an improvement in India’s ranking, said Hertveldt.
Changes in import-export procedures have shaved seven days off the average time taken to import or export merchandise in India. Now, it takes 18 days on average to import or export merchandise, according to Doing Business 2008.
Hertveldt said India could improve on judicial reforms and a brisker pace in the process to start a business. On average, it takes almost four years for the judiciary to decide on commercial disputes in India, higher than South Asia’s average of 990 days.
Reforms include streamlining procedures that make it possible to more quickly start businesses, register property and obtain building permits.
Research by IFC and World Bank showed that typically, an Indian firm has to pay taxes 60 times a year—this includes the aggregate of state taxes such as value-added tax and Union government taxes such as corporate tax. The average for South Asian firms is 29 times a year, said Hertveldt.