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India's slip in the Ease of Doing Business list is bad news

comment Updated: Nov 01, 2013 15:49 IST

Indian industry has shown remarkable maturity in unshackling its past. From the iconic software industry that has fuelled aspirations for prosperity among millions, to the conventional small firms that form the backbone of the country's manufacturing and services sector, phenomenal entrepreneurial success stories have been created in India.

The world has been peering curiously at the stuff bubbling in India's economic laboratory. Three years ago, US President Barack Obama had come calling with the largest business delegation ever to accompany a US head of State to any country - a clear sign that India's rising economy had never mattered more to the world than then.

Yet, India continues to be seen as a dodgy destination for anyone wanting to do business here. It has fallen three positions in the World Bank's Ease of Doing Business Report for 2014, slipping from 131 to 134, and way behind most of its South Asian neighbours.

On average around the world, starting a business takes seven procedures, 25 days and costs 32% of income per capita in fees, according to the report released on Tuesday. In India it takes 12 procedures and 26 days.

That leaves the country that hopes to be a world power - behind China (ranked 96), Nepal (105), Pakistan (110) and Bangladesh (130). The worst was Suriname with 208 days to start a business.

The best five were Singapore, Hong Kong, New Zealand - where it takes just one procedure, half a day and no fee to start a business - the US and Denmark.

The ranking will bring India more grief as it has struggled to attract foreign investment in recent years because of stalled reforms, complex tax regimes and local rules.

But all is not lost. For a country that is battling to lure precious dollars, the new Companies Act should act as a strong catalyst. The proximate risks of the roiling investor sentiments are due to two principal factors: policy inconsistency and political instability.

Investors want hassle-free entry into the Indian economy. A modern, contemporary corporate law framework with clearly defined rules, besides preventing corporate scams and will greatly help India's image as an investment destination.