Date:30/09/2004 URL: http://www.thehindubusinessline.com/2004/09/30/stories/2004093000120500.htm

Back India is still a difficult place for business: Study

Anil Sasi

A World Bank study reveals that it is as difficult to start a business in the country as it is to keep it running or even to close it down.

New Delhi , Sept. 29

WHEN it comes to doing business across the globe, India still presents the most challenging obstacle course for entrepreneurs. Compared with global benchmarks, it is as difficult to start a business in the country as it is to keep it running or even to close it down.

For instance, while it takes about 89 days for a business to get registered formally in India, as against the global benchmark of just two days in Australia, it requires an astounding 10 years for a company to go through the insolvency process in case of bankruptcy here, as against just four months in Ireland, a World Bank study has revealed. The study based its findings on experiences of domestic limited liability companies conducting general commercial activity.

The recent benchmarking study on the regulatory cost of doing business conducted across 145 countries suggests that the cost of starting a business in India is nearly 50 per cent of the gross national income per capita, as against only around 11 per cent in Sri Lanka and 36 per cent in Pakistan. The least cost globally to start a business is in Denmark.

In case of employment regulations, India again proves to be among the most rigid countries and scores a high 48 points on a rigidity index, whereas Hong Kong comes out as the least rigid with a score of zero.

Again, for registering a property, in India it would take about 67 days, as against the global benchmark of only one day in Norway.

India also proves to be one of the most expensive countries to register properties, with the cost of registration seen as a percentage of the property value at a high 13.9 per cent here as against zero costs in Saudi Arabia.

In terms of sanctity of contracts, it requires 425 days to enforce a contract in India, as against only 27 days required in Tunisia, the global benchmark.

"The cumbersome procedures in India clearly point to corruption, holding back private investment and pushing more people into the informal sector," an investment analyst said.

It emerges from the study that tiresome entry procedures for starting business, inflexible regulations governing hiring and firing of workers, inefficiencies in property registration, legal hurdles in enforcement of contracts, lack of access to credit and the extensive amount of time taken for winding up sick businesses are some of the areas where companies face big setbacks when doing business here.