Business of bottlenecks

Despite economic openness of two decades, India still remains one of the  most  difficult places to do business in the world.The new IFC and World Bank Report, ranked India 132nd among 185 countries in terms of ease of doing business. The report is an upsetting critique of the state of affairs in the Indian legislative and bureaucratic system. In spite of 22 years of economic reforms, India is still grappling with archaic and cumbersome laws and procedures. It appears that not by default but by design the system deters the local and foreign investors to do business in the country.

 India is the lowest ranked among BRIC nations. Brazil (130th), Russia (112nd), China (91th) and 'Taiwan, China" (16th) and is also below neighboring Pakistan (107th) and Nepal (108th). As per the IFC and World Bank report, in the past eight years, India did implement a total of 17 institutional or regulatory reforms making it easier for local entrepreneurs to do business here  than any other economy in South Asia since 2005. It has focused mostly on simplifying and reducing the cost of regulatory processes in key areas such as starting a business, paying taxes, and trading across borders but it did not improve at all rather slipped on six parameters among ten on which the countries were ranked.

 India’s oppressive bureaucracy and immeasurable red tape is a nightmare for small business.   The report -Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises by International Finance Corporation and World Bank which is the 10^th edition of their Doing Business series- states that It also takes one of the longest time (1420 days) required to enforce a business contract in Indian system. Also areas such as starting business, getting electricity, protecting investors and resolving insolvency have seen a further  degradation   as compared to last year. 

Outdated laws are the crux of the problem. Old procedures and lack of computerization in several departments makes it even worse.  India is in dire need of judicial reforms as well. The time taken to fight a dispute in Indian courts is roughly three times more than that in OECD countries. Dual bureaucracy (center & state) is a double whammy which makes the policy-implementation way harder. Recently Finance Minister P. Chidambaram pointed out that almost 700 projects with investments of Rs 7,500 crore are stuck due to delays caused by the absence of regulatory approvals. A deep rooted corruption which is highly pervasive across the system forces businesses to become corrupt to survive. In its 2008 study, Transparency International reports about 40% of Indians had first-hand experience of paying bribes or using a contact to get a job done in public offices.

On the name of reforms India is opening its doors again for foreign investment but it’d do no good as long as it doesn't pay heed to the core i.e.  the efficiency of government systems. India is a growing market therefore investment may come, But the fact remains that fresh investment will increase the corruption potential thanks to the everlasting bottlenecks. Ease of doing business is the fundamental reform that must be taken at the earliest to make India’s growth story clean, not tainted with graft and corruption.