India moves up in business climate ranks

India moves up 12 notches and is now ranked at 120 in a “Doing Business 2008” report of the IFC, reports Deepak Joshi.

India has moved up 12 notches and is now ranked at 120 in a “Doing Business 2008” report of the International Finance Corporation, the private sector lending arm of the World Bank. The survey studies issues like bureaucratic hurdles and access to credit and other concerns linked to the ease of starting or running an industry.

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While it has put quite a bit of its red tape legacy behind, India is still behind its neighbours Bhutan (119), Nepal (111), Sri Lanka (101), China (83) and Pakistan (76). But taking main Indian cities alone into consideration, India's position is much higher.

Initiating a discussion on the report, IFC vice-president Michael Klein said China, Egypt, India, Indonesia, Turkey and Vietnam all had improved in the ease of doing business. India has rivalled China in the pace of reforms and regulatory reform encourages entrepreneurship, the report said.

“If the top score among Indian cities in each of the Doing Business indicators were used for the country as a whole, India would rise 55 places in the aggregate country rankings,” he added.

India ranks 177 out of 178 countries in enforcing contracts. It takes almost four years to resolve a commercial dispute through the courts in Mumbai, compared with slightly more than a year in Shanghai. It takes 10 years to go through a bankruptcy procedure in India, versus less than two years in Shanghai. Another potential area of reform is property registration. India ranks 112 on this indicator: it takes two months to transfer property and costs 7.70 per cent of India’s gross national income. In China, it takes half the amount of time and cost.

“The report finds that equity returns are highest in countries that are reforming the most. Investors are looking for upside potential, and they find it in economies that are reforming,” Klein said. IFC regional director for South Asia Paolo M. Martelli said, “ India is setting the standard for reform in South Asia, with an explicit policy objective to become a leading business-friendly economy.”