New Delhi: The International Finance Corporation (IFC) and the World Bank on Tuesday released the Doing Business in India 2009 report that measures business regulations and enforcement across 17 Indian cities. In an interview, Penelope J. Brook, acting vice president, financial and private sector development, IFC, explains how India can improve its ranking by learning from its own best practices.
How have Indian cities reformed since your last study?
We do two kinds of reports. We have the global report which comes annually in September, where we look at 181 countries. We take the largest city in each case and do the Doing Business indicators. So in September 2008, when we released the last report, India was represented by Mumbai and ranked 122 out of 181 countries. We have not done a sub-national study (in India) of this scale before. In 2006-07, we covered a number of Indian cities (12), but this is the first time we have covered 17 cities. So we cannot do a precise comparison.
Global comparison: Brook says the report’s focus is more on the question of how do you create an environment of entrepreneurship. Ramesh Pathania / Mint
Having said that, we can look at cities that we covered before and see what they have been doing. We see a number of cities like Bhubaneswar, where they have made active reforms in starting a business, registering a property, getting a construction permit in the time period between the sub-national reports. India has been systematically reforming in areas covered by Doing Business over the last five years. It is the biggest reformer in the region during the same time period. And we see that flowing through in cities where we have earlier comparisons.
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The study focuses mostly on small and medium size as well as start-up businesses. How does it help foreign investors in making investment decisions?
You are right that in the study we are focusing on regulatory environment for small and medium businesses. We are talking about firms with 60 or 100 people. So it is reasonable-sized firms. Our focus is on how you create a better environment for domestic firms. Some of the causes that we are talking about here may not matter for a large foreign investor. We are not designing it to measure how attractive a country is for investment. Our focus is much more on the question of how do you create an environment of entrepreneurship.
That means the study is relevant within the boundaries of a country. It loses its significance beyond the boundaries.
Yes, it is focused on that country’s regulation. Where we find the global comparison useful is (it) makes you think. We thought we had our system in pretty good shape, then the country next door, which we thought to be our natural competitor, looks better than us. So it opens up a conversation. The ranking also helps people look for countries that they can learn from.
How does India fare as compared with China in such a ranking?
In the overall rankings of Doing Business, which came out last year, China ranked 83 and India was at 122. If you could simply take the best practices from India and do them in one place, India will rank 67, ahead of (the) rest of the BRIC (Brazil, Russia, India, China) nations. At present, Brazil ranks 125 and Russia, 120, as per last year’s ranking.
Your study shows Bhubaneswar in Orissa third in the overall ranking, ahead of even Gurgaon in Haryana. Does this mean that poverty or lower per capita income in a particular state has nothing to do with reforms on the ground?
We are not focusing on everything that matters in (a) business environment. We are not looking at the reach and quality of infrastructure. In some cases, we see low-income states are the best precisely because they have focused energy on how do we simplify procedures, can we use e-governance and make things move faster.
None of these reforms is very expensive. This is a pattern that we have found in other countries as well, where often lower income cities and states may be having to innovate and find easier and cheaper ways of doing things. In that sense, cities like Patna and Bhubaneswar can offer experiences to wealthier cities to learn from.
Graphics by Sandeep Bhatnagar / Mint