It might not be a matter of great surprise that India has slipped by three positions from 131 to 134 out of 189 countries in one year in the ease of doing business, according to an index prepared by the World Bank.
The ranking is worse and much lower at 179 in the case of starting a new business. Even terrorism-ravaged Pakistan, civil-strife-hit Nepal and variously disadvantaged countries like Sri Lanka and Bangladesh fare much better than India. The slippage in ranking in the last year may have much to do with the policy paralysis in government and the general deterioration of business environment, but the position was even otherwise quite bad. This has been pointed out in the past also but no substantial effort has been made to address the situation.
Since government policies and executive decisions play a major role in the starting of business enterprises and in their working, conducive official action is important for this. Even after the relaxation of rules and regulations that went with economic liberalisation the climate is not business-friendly and is sometimes even hostile. The report has noted that it takes seven procedures and 16 days on an average in other countries of the region to start a new business but it takes 12 procedures and 27 days in India. The cost, as a percentage of per capita income, is much more than in other countries. This makes doing business in India more costly, difficult and time-consuming. The slow processes of democracy are often cited as a reason but other democratic countries fare much better than India. The actual reasons are wrong policies or lack of policy consistency, bad implementation, red tape and corruption.
Some obstacles like problems in land acquisition and in securing environmental clearances are being addressed but even the amended legal provisions are not considered the best and ideal. Investments worth thousands of crores have been stalled for want of clearances. Laws, rules and regulations have to be better streamlined and more effectively implemented. The new Companies Act is a step in the right direction. India is still attractive to many intending investors because of the large potential it has. If the country did well for many years with a high economic growth it is not because of the business environment but in spite of it.