Doing Business isn't Easy

Sep 1, 2012


- By Asad Dossani, Author, The Lucrative Derivative Report

Asad Dossani
Each year, the World Bank publishes an index that ranks countries based on the ease of doing business. The factors that determine the ranking include how easy it is to start a business, to raise capital, to get the necessary permits, to enforce contracts in court, and many others. It is primarily a measure of how effective or ineffective business regulation is in a country.

In this ranking, 183 countries are included. Any idea where we would rank on such an index? Given what we know about widespread corruption and the ineffectiveness of economic policy in our society, chances are we would not do very well. And that is absolutely the case, as we rank 132 out of 183 countries.

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A ranking of 132 is bad. It means we rank below all the other large emerging economies like China, Brazil, and Russia. We also rank below our neighboring countries like Bangladesh, Nepal, Sri Lanka, and Pakistan. We rank below countries going through debt crisis like Greece and Spain. The countries we rank above are mostly African countries that are in much worse economic shape.

The highest-ranking country on the list is Singapore. The Reserve Bank of India (RBI) recently published a report on the Indian economy, and they singled out the ease of doing business as one of the primary factors holding back the Indian economy. In the same report, Singapore was held as a good example of how a government can implement effective business regulation.

The RBI then concluded that lowering interest rates is unlikely to revive the Indian economy on its own. This is because the ease of doing business is such an important factor, that without any improvement in business regulation, we are likely to remain where we are.

The RBI's points are valid. For an economy to reach its full potential, we need competition in the marketplace. And this means it needs to be easy to start and run a business. For existing businesses, it needs to be the case that they try to increase profits by providing better goods and services at lower costs.

It is so often the case that businesses try and increase their profits by manipulating regulations in their favor, thereby stifling new competition. A change in this mode of thinking is what is needed to revive the economy, and push us higher on the Ease of Doing Business index.

is a financial analyst and columnist. He actively trades his own and others' funds, investing primarily in currency, commodity, and stock index derivative products. Prior to this, he worked at Deutsche Bank as an analyst in the FX derivatives team. He is a graduate of the London School of Economics. Asad is a keen observer of macroeconomic trends and their effects on global financial markets. He is deeply passionate about educating investors, and encouraging individuals to take part in and profit from financial markets. To put it colloquially, he wishes to take Wall Street products and turn them into Main Street profits!

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3 Responses to "Doing Business isn't Easy"

AJ

Sep 3, 2012

if we make every thing easy then what will our MPs & MLAs will do? how will they earn their living & fight the next elections? no no we should be at 183 and not 132 then only we do our best honours to our elected representatives and take good care of them.
It is really a shame for our country that our elected representatives have fallen to such levels and politics have become a gutter that our youth don't even think about it.

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sharad sharda

Sep 2, 2012

Ease to start and so also run a business is a key to ensure competition in the market which will not only give an opportunity to the have goods/services at competitive rates but also inculcates a habit to provide goods and/or services by sellers in an efficient manner. Presently in India laws are such complicated containing a number of flaws in its implementation. If rules/laws are so simplified, easy to understand and so also to implement giving no discretionary powers to its regulating authorities with a strict and heavy penalty on its violation by businessmen and so also on its regulating authorities it will yield definitely unbelievable results and increase rating of our country above a number of large emerging economies of the World. In any case discretionary powers to the regulatory authorities should be abolished out rightly to bring down the corruption in the system and simultaneously to increase revenue to the State Exchequer.

SHARAD SHARDA

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Anupam Garg

Sep 2, 2012

more inputs on the factors / parameters which determine 'ease of doing business' would have been useful

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