Business in India is quite a task

China at 91, Pakistan 60 and Bangladesh 65 rank better than India at 116.

India ranks 116th among 155 countries when it comes to the ease of doing business, according to International Finance Corporation's Doing Business 2006 report released on Tuesday.

Among south Asian countries, only Afghanistan at 122 has been ranked below India. China at 91, Pakistan at 60 and Bangladesh at 65 have been judged by the report as easier destinations for doing business.

The 187-page report says that the time taken to start a new business in India has come down from 89 days in the last report to 71 days. Besides, 11 formalities are required to be completed in India now against the South Asia average of 35 days.

On the other hand, it takes just 12 days to start a business in New Zealand, the top-ranked country, six days in Singapore, which is ranked second, and five days in the US, ranked third.

The report also says it takes 270 days to obtain a licence in India, against a regional average of 195 days. It is 56 days for Finland and 60 days for South Korea, the countries that have scored the highest on these parameters.

In China, a company spends 363 days to obtain a licence, though it takes 48 days to start a business. The report also estimates that it takes 10 years to close a business in India, nearly double the regional average of 5.1. It takes less than half a year to shut shop in Ireland, which has the shortest insolvency process globally.

India, however, has fared better on the legal rights index, fetching 5 on a scale of 10, compared with the regional average of 3.8, though it is far below Singapore, Hong Kong and the United Kingdom, each scoring a perfect ten.

The report names Pakistan among the top ten reformers globally for reducing the cost to register property, increasing penalties for corporate governance violations and simplifying shipment licensing norms. India was among the top reformers last year.

This year, the report has praised India for setting up a credit information bureau and putting in place a new system for enforcing collateral.

According to the report, these moves have resulted in the enforcement time falling from 10 years to 6 months. The reduction of stamp duty for property registration, from 10 per cent to 5 per cent, has also been cited as a way forward for other countries as revenues have increased due to better compliance.

"Reforms have been initiated in the last few years but more work is required on bankruptcy laws and labour regulations, particularly by state governments," Simeon Djankov, the lead author of the report, told Business Standard.

Though tax rates were moderate, businessmen had to pay 59 taxes in India and spent 264 hours paying them, he pointed out. "The process is not very automated, and you have to deal with the bureaucracy," he said.