World Bank assesses Indian business environment for SMEs
25th August 2009
Simon Harding
The city of Ludhiana in the Punjab is the easiest place in India to set up a business, according to a new report by the World Bank. Doing Business in India 2009 compares the business environments of 17 Indian cities. It is the Bank’s first sub-national report dedicated to India. The Punjabi city came top of the rankings, which focused on the local regulations affecting the establishment and growth of a small business in seven areas: the ease of setting up a small enterprise, dealing with construction permits, registering property, paying taxes, cross-border trading, enforcing contracts and closing a business.
The report reveals significant variations between India’s cities and calls on city authorities to learn from the good policies of their colleagues in other municipalities. Starting a business is fastest in Mumbai and Noida at 30 days, 11 days quicker than the slowest city in the survey, Kochi in Kerala. Obtaining construction permits and clearances is easiest in Chennai, Bengaluru and Hyderabad where entrepreneurs must undertake 15 dealings, whereas small business founders in Mumbai must deal with up to 30 separate procedures. If a single India city implemented all the best practices that exist in these seven areas across the 17 cities in the study, it would rank 67th out of 181 global economies, 55 positions better than India’s current position.
Several cities in the 2009 survey were included in the Bank’s Doing Business in South Asia 2005-2007 report. Amongst them, Jaipur came in for criticism over the lengthy 28 day weight entrepreneurs had to endure to register property. Thanks to improved computerization and new sub registrar offices, by 2009 the city had cut this time to 15 days, making it one of the fastest in the country. Improvements in Jaipur demonstrate the willingness and ability of city authorities to implement business friendly reforms.
The release of the survey comes at a difficult time for Indian businesses. The global downturn has hit India’s export-orientated industries particularly hard as overseas demand for their goods has slumped. Several cities featured in the study are export hubs: cities with a reliance on one or two export-dependent industries, making them vulnerable to fluctuations in global markets.
More business friendly cities, like Ludhiana (a carpet making hub), Ahmadabad (pharmaceuticals) and Jaipur (textiles) may be in a better position to survive the decline in exports than lower ranking cities like Chennai (leather goods) and Bengaluru (machine tools). As unemployment rises and companies close, a more business friendly environment may allow those affected to quickly move into industries which are relatively unscathed, such as those producing goods for the domestic market.
Also see: Doing Business in India 2009, World Bank, available at http://www.doingbusiness.org/subnational/exploreeconomies/India2009.aspx