Sunday, November 10, 2013

Doing business in India is quite difficult.

Indian small and medium enterprises have to comply with 12 procedures and it takes on average 27 days to start a business.  Dealing with construction permits involves 35 procedures and a 168-day waiting period, getting electricity involves 7 procedures and a 67-day waiting period, registering property requires 5 procedures and a 44 day waiting period, and for resolving insolvency it requires a company to wait 4.3 years.  These are statistics revealed in World Bank's 2014 'Doing Business' report.

In the report, subtitled 'Understanding Regulations for Small and Medium-Size Enterprises', India ranks a lowly 134 in the ease of doing business index, but I fear the real situation is even worse than this, and I would greatly appreciate if our readers kindly give some feedback on this.  Does it require a small businesses overcome more hurdles than those mentioned by the report? Isn't it possible for us to follow the model of even small countries like Singapore, Hong Kong, Taiwan, Malaysia and Norway in creating a business-friendly regulatory environment?

The same report says that an SME needs to collect 9 types of document, including Bill of Lading, Certificate of Origin, Commercial invoice, Foreign exchange control form, Inspection report, Packing list, Shipping Bill (customs export declaration), Technical standard certificate and Terminal handling receipts, and it requires on average 16 days to export.  Similarly, import procedures involve 11 documents and a 20 day waiting period. In Singapore, it requires only 3 documents and a 3 day waiting time and for exports and 3 documents and a 4 day waiting time for imports.

Besides red tape and bureaucracy, corruption is often cited as one of the biggest challenges to the Indian SME sector's growth story. For excise registration:  Rs. 25000 with application and Rs. 20000 for issuing of certificate, monthly return submission Rs. 1000, yearly audit of Excise and Sales Tax: Rs. 50000 or above as per turnover;  these are the amounts of bribe demanded by government officials -- an entrepreneur informed me last year. Such a situation is really pathetic. We must free ourselves of this shackle of corruption.

Recently, our Finance Minister P Chidambaram has said that our current account deficit (CAD) would come down, but he has also expressed concern over dull investment sentiment due to sluggish economic recovery, but I think this challenge can be addressed to a significant level by improving the business environment and making it easier for foreign businesses (as well as domestic businesses) to do business here. Mere FDI measures will not help attract investment.

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