India is South Asia's top reformer: World Bank
By Arun Kumar,
Washington, Feb 13 (IANS) Doing business became easier in India in 2005-2006, thanks to five reforms making the country South Asia's top reformer among the world's leading 20, according to a new World Bank report.
These reforms reduced the time, cost and hassle for businesses in India to comply with legal and administrative requirements, said the report released Tuesday by the World Bank and its private sector arm, International Finance Corporation (IFC).
Of the 12 major Indian cities covered by the "Doing Business in South Asia 2007" report, Hyderabad has the most business-friendly regulations, followed by Bangalore and Jaipur.
Mumbai came in second-to-last and Kolkata last, as these cities impose the most complex and costly business regulations. Bhubaneswar, Chandigarh, Chennai, Lucknow, New Delhi, Patna and Ranchi rank in the middle.
Typically, large urban centres such as Mumbai and Kolkata have a high volume of business, so regulatory and administrative bottlenecks there create serious congestion.
"Doing Business..." tracks a set of regulatory indicators related to business start-up, operation, trade, payment of taxes and closure by measuring the time and cost associated with various government requirements.
India, the region's top reformer, implemented reforms to simplify business registration, cross-border trade and payment of taxes, as well as to ease access to credit and strengthen investor protection, says the third report in a series of South Asia regional reports.
Although the reforms improved India's ranking over last year's, it still ranks relatively low at 134 and stands 41 places after China, which is reforming at a faster pace. The top-ranked countries in the region are the Maldives (53) and Pakistan (74), followed by Bangladesh (88), Sri Lanka (89), Nepal (100), India (134), Bhutan (138), and Afghanistan (162).
"India has made significant improvements in reducing the amount of red tape entrepreneurs face daily. It now takes, for example, 35 days to register a business in Mumbai, compared with 71 days a year ago and 89 days in 2004. But despite clear improvements in five out of 10 'Doing Business' indicators, India can do much better," said Caralee McLiesh, an author of the "Doing Business in South Asia" report.
"By broadly adopting best practices in business regulation that already exist within the country, India could jump significantly in the global 'Doing Business' rankings, well ahead of other emerging markets like China," she added.
Different local level regulatory requirements, as well as differences in the implementation of national-level regulations, either enhance or constrain local business activity and causes substantial differences in the ease of doing business among Indian cities.
For example, in Hyderabad it only takes 35 days to register property, compared to New Delhi, where it takes almost four times as long (138 days), or Kolkata, where it takes almost five times as long (155 days). Within India, it is fastest to import and export goods through the Chennai and Kolkata ports, as opposed to Mumbai.
States can learn from each other in the areas of business regulation. For example, it is easiest to start a business in Jaipur. Closing a business is easiest in Bangalore, while registering a property is easiest in Hyderabad, the report said.
"Creating jobs is a priority for any government. More business-friendly regulations create opportunities and more equitable growth. Easing obstacles for entrepreneurs is key to creating more jobs," said Simon Bell, World Bank Manager for Financial and Private Sector Development in South Asia.
"In India, over 8 million workers have formal jobs in the private sector - in a country of over 1 billion people and a workforce of 458 million. Indian states would greatly benefit from new enterprises and jobs, which can come with more business-friendly regulations," he added.
After adopting best practices, India's global ranking would go up to 79 from the current 134, the report said.
Indicator City with best score per indicator: starting a business- Jaipur; dealing with licenses, enforcing contracts and paying taxes - Bhubaneswar; registering property - Hyderabad, Chandigarh; trading across borders - Chennai; closing a business - Bangalore.
In the case of Pakistan, Karachi has the most business-friendly regulations, while Quetta imposes the most complex and costly administrative barriers. Faisalabad, Lahore, Peshawar, and Sialkot rank in between.
In Bangladesh, Dhaka has the most business-friendly regulations. By contrast, Bogra imposes the most complex and costly administrative barriers, while Chittagong and Khulna rank in between, according to the study.