Why Is India's Business Rankings Still Not Good Enough

Business Rankings

India now ranks 100 out of 190 countries in the world in terms of ease of doing business, according to the latest report released by the World Bank. This is an improvement of exactly 30 spots over the previous year’s ranking. It is a big jump, no doubt. The previous WB Group’s Doing Business report had placed India at No. 130. New Zealand tops the list, followed by Singapore. Both countries are favorite destinations for business investments. China still fares better on the index, being placed at No. 78. [Read the full report here]

“It appears that the push for digitalization has improved processes set up for clearances and has succeeded in removing bureaucratic hassles. The improvement is driven by the installation of insolvency architecture, digitalization as well as the legal framework needed in order to reduce time and cost overruns, particularly for construction permits; improvements in tax payments and credit availability, as well as protection of investors. Technology has a big role to play in this,” says Shashank Dixit, CEO, Deskera.

One entrepreneur sounded incredulous when he was told about India’s 30 place jump in business rankings. Clearly, the startup owner was not convinced. There are several others that agree with the entrepreneur’s disbelief. Nevertheless, they do agree that some aspects have taken a turn for the ‘better’ than before. Experts too say that challenges and bottlenecks remain, which often succeed in derailing businesses.

Entrepreneurship is a jobless economy

The business rankings also reflect that entrepreneurial activity has picked up pace over the last few years. The government too has been exhorting young people to turn entrepreneurs as the job market has stagnated. The Indian economy is just not producing enough jobs. According to the Economic Survey, annual employment growth in India was barely 0.5 percent during 2004-12, whereas the labor force growth was around 2.9 percent. According to the Indian Government’s very own Labor Bureau, India created only 135,000 jobs in eight labor-intensive sectors in 2015, whereas the number of people working or looking for jobs grew by more than 10 million.

What the World Bank report considers

The report takes into account factors like the time, procedure, cost and minimum capital needed to start a business, register property, and get construction permits, electricity connection, and credit. The index also looks at protection of investors, trading across borders, and amount and number of taxes. Enforcing contracts and resolving insolvency are also factors attracting scrutiny.

“The time that is taken to get the basic facilities is a good indicator of how easy it is for a business to operate in India. Basic requirements such as electricity connection for a new warehouse, number of documents needed to open a new business, cost as well as time needed for export and import processes gives a fairly basic idea. There are other factors also which need attention such as the cost, time, and recovery rate for bankruptcy proceedings,” says an entrepreneur, who runs an exporting unit from New Delhi.

100 is just a number

If the country wants to be a highly preferred business destination, then it has to do better than 100. Being placed at No. 100 does not say a lot about a country wanting to be known for entrepreneurship. Any country, aiming to be a world leader, cannot afford to be placed around 100 on the list. Earlier, it was situation was worse. It never looked good on India to be placed lowly at the international business rankings. A correction was needed. And it has come in good measure.