Sunday, February 25, 2007

Bonsai Business

License raj over? Are you kidding??

The Indian economy was opened up in 1991 and from that time onwards we have come a long way. We have literally quadrupled our GDP, the service sector is booming, manufacturing is picking up and the Indian corporates are on a new high. No doubt that today India Inc. is a major inspiration for the millions of teeming young and aspiring Indian entrepreneurs who are willing to march through their path and become successful. Good news aside, the biggest dampener, at a time when the economy has opened up for more than a decade and a half, is the mindset of the government which has unfortunately still not liberalised and is still caught up in the legacy of unnecessary and illogical controls, making the entire environment suffocating for entrepreneurs to thrive.

To substantiate this, let me refer to a research report compiled by the World Bank and the International Finance Corporation. This report essentially provides a deep understanding about the needless impediments the official environment poses for starting a business in India. In terms of ease of doing business, India, for all the hype surrounding its GDP growth rate, has been pathetically ranked at 134. Whereas it takes 11 procedures and an average of 35 days to start a business in India, it takes a mere 16.6 days in the developed OECD (Organisation for Economic Cooperation and Development) countries like Belgium, Japan, United States, Canada and Austria for the same. In India, to obtain a license for starting a business, it takes 20 procedures and a minimum 270 days, while the same process for the OECD countries requires 14 procedures and 149.5 days. In addition to this, when it comes to registering properties, it takes 62 days and 6 procedures in India in comparison to nearly half the number of days (31.8) and 4.7 (procedures) for the OECD countries.

Yet, it doesn’t end here. While it takes 59 different payments, 264 hours for those 59 payments, and on an average 81.1% of profit to pay taxes in India, the same for OECD countries is 15.3 different tax payments, 202.9 hours and 47.8% of profit. At the same time it requires 10 different types of documents to accompany any export from India (4.8 for OECD), 27 days (10.5 for OECD) $864 per container ($811 for OECD), 15 documents for import (5.9 for OECD) 41 days on average for an import (12.2 days for OECD) and $1,244 per container when compared to a mere $883 for OECD countries. Not just this, it takes a mammoth 1,420 days and 56 procedures to enforce a contract in ‘Shining India’ in comparision to a mere 22 procedures and just 351.2 days in developed members of the OECD.

Inspite of all that, if India Inc. is still among the best in world, then all credit goes to them. In fact, had they been in some the OECD countries, no doubt their feats would have been much more than what they have been in India. Reason? In those countries the governments don’t believe in paying lip service. They do the real work of creating an enabling environment for both the entrepreneur and the enterprise, and not drain out their entire enthusiasm.

Did anyone say that ‘license raj’ in India was actually over in 1991???


1 comment: