India’s ranking in the World Bank’s Ease of Doing Business report has slipped two rungs to 142. By all measures India continues to remain a dodgy destination to do business. Getting a power connection for a new business takes 105 days, more than three times Singapore’s average of 31 days.
It takes 47 days to register a property in India compared to 4.5 days in Singapore. Resolving insolvency can take 4.3 years in India to 0.8 to Singapore.
The latest rankings, updated till May 2014, do not factor in the string of initiatives that the Narendra Modi-led government has unveiled including the signature ‘Make in India’ campaign. This initiative is as much an invitation to domestic and foreign companies as a promise to rectify everything that has kept the country at almost the bottom of the ‘ease of doing business’ index.
From energy shortages and land problems to ambiguous tax laws and Byzantine labour rules, a barrage of hurdles have kept away large-scale private investments in what should otherwise count as a massive, attractive market. Lack of cooperation between the Centre and state governments also turns off investors.
These issues remain central to the ambition to turn India into a manufacturing powerhouse, vowing to remove bureaucratic sloth and make the country more investor-friendly. Over the last few weeks the prime minister has sought to hard-sell the story of India’s rising economy.
The government has promised to remove red tape and ease rules, and pledged a non-adversarial governance regime to push companies to choose India as their preferred investment destination.
The new government has set a target of leapfrogging to a rank of above 50 in the doing business index over the next two years. If recent announcements are any indication, there is a sense of urgency to achieve this target. Registering a property or building a warehouse should not be time-consuming.
It’s not about foreign investors only. While adverse policy pronouncements over the last two years had dented India’s image as an investment hotspot, sparking fears among global investors, domestic entrepreneurs also have a similar tale to tell about India’s business environment.
The multiplicity of bodies and agencies adds to costs. The new government has begun well by sending out the right signals about its intent and ambitions. It now has to back this effort with speed of implementation and consistency of policies.