Not businesslike

This is the third time the World Bank and the International Finance Corporation (IFC) have published a Doing Business report. The number of countries ranked has increased from last year's (2005) 145 to 155 in 2006.

The report hasn't been around long enough for methodology to become robust. Newer categories are added every year, this year's contribution being paying taxes and trading across borders.

High Indian transaction costs associated with entrepreneurship have often been documented, especially for the organised or formal sector, though the burden for the unorganised sector is no less horrendous.

Such transaction costs encompass all three stages of an enterprise's operation""entry (starting a business), functioning (hiring and firing workers, registering property, getting credit, protecting investors, enforcing contracts, paying taxes, trading across borders) and exit (closing a business), and are procedural costs, as opposed to transaction costs, which include infrastructure costs.

Although the World Bank/IFC includes the first and the third, the emphasis is more on the second. Given data problems, there can be legitimate complaints about methodology""subjectivity of respondents, non-representative samples (such as on registering property) and weighting methods used to obtain composite indices. This becomes more serious when one obtains data not just on the number of procedures and days spent, but also imputes monetary values. If India performs badly on other governance surveys, it is largely because of procedures and administrative costs, including corruption, which the World Bank/IFC carefully avoids.

The key constraint is not always the number of procedures, but time and money spent on them and the report is useful, despite limitations, because one can make cross-country comparisons and track a country's improvement (or deterioration) over time.

For instance, India's overall rank is 116th out of 155 and is bettered not just by China, but all of South Asia. As examples, starting a business requires 11 procedures and 71 days in India (down from 89 in 2005); dealing with licences requires 20 procedures and 270 days; export procedures take 36 days; import procedures take 43 days; there are 59 taxes and insolvency procedures take 10 years. Notwithstanding this dismal picture, Economic Survey 2004-05 highlighted the 2005 findings, probably because last year India was classified in the top 10 reforming countries, thanks to changes in bankruptcy (securitisation) laws.

What must be especially galling is that Pakistan is in that category this year, courtesy changes in property registration, corporate governance violations and shipment licensing.

Interestingly, the subtitle of the report has changed from last year's "removing obstacles to growth" to this year's "creating jobs". That ought to gladden the UPA's heart and administrative reforms are also a key National Common Minimum Programme promise.

While many such reforms are state government subjects, there is a lot in the central domain and there are no Left hackles to be raised. Unfortunately, the government isn't serious about the agenda. Administrative reforms have been reduced to civil service reforms in the proposed Administrative Reforms Commission and broader issues have been passed on to the National Commission for Enterprises for another report.

As if the agenda isn't already known and hasn't been described in existing reports. No one expects India to be at the top of the doing business pecking order, as New Zealand is today.

But given the pace at which other countries are reforming, India may soon find itself at the bottom of the heap with Sudan, Chad, Burkina Faso and Congo.