Peer reviewed analysis from world leading experts

It’s time to get down to business in India

Reading Time: 4 mins

In Brief

In a recent interview, the Governor of the Reserve Bank of India (RBI), Raghuram Rajan, stressed the need to pay more attention to one of the most underestimated issues currently facing the Indian economy: the country’s poor performance in the ease of doing business. It is undeniable that Indian policymakers and legislators have neglected this issue for too long, leading to a downgrading of India’s business and investor environment.


  • A
  • A
  • A


  • A
  • A
  • A

India has now slipped three places down to 134 in the World Bank’s 2014 Ease of Doing Business rankings (Singapore is ranked first). Within the South Asian region, India is ranked the third lowest, just above Bhutan and Afghanistan.

So what exactly is responsible for India’s woeful performance in these rankings? Why is it so hard to start a business in India when in many respects it resembles China — ranked 16 — with its large domestic market, high-consumption as a % of GDP and cheap labour market? These are questions that the upcoming government should endeavour to answer.

For a developing country like India, it is of critical importance to ensure a favourable business environment, especially for those who are looking to reap the benefits of its domestic market potential and the upward trend in consumption expenditure. There is a need for more domestic investment in the Indian economy to boost growth, and this can be encouraged by making it easy for start-ups to do business in India. The State’s failure to do this has seen the country become too dependent on foreign investment (through foreign direct investment and foreign institutional investors) to address the growing investment deficit. Simply attracting more foreign direct investment to an economy already suffering from policy paralysis will not change much.

The deterioration in India’s performance on various individual metrics related to the ease of doing business raises many questions about the quality of the current Indian legislature. Given that the Congress government has been in power for almost 10 years, it is a damning indictment that no concrete measures have been taken to reduce unwarranted delays in starting a business, dealing with construction permits, registering property and protecting investors.

The only metric upon which India seems to have improved between 2005 and 2013 is access to credit, but this has been largely made possible due to the effectiveness of the RBI’s monetary policies after the global financial crisis and the troubles in the euro zone. The RBI has been able to provide banking and credit services to 90 per cent of unbanked regions in India over the past decade. Several legislative measures have been enacted in this area: the RBI-backed Banking Amendment Bill in 2011, for example, and the new Companies Bill in 2013, which introduced the concept of a ‘one person company’ into law. But these achievements are largely chimerical. Nothing concrete has been done by the state to reduce the more than 20 procedures and considerable time, often more than 35 days, required to start a business.

One of the steps that need to be taken is to make it possible to complete the paperwork for starting a new business online. Many have called for this in the past, but it has taken too long to be implemented across the board. The reason for this is simple: vested interests have prevented change. Lobbyists for middlemen have ensured that online application systems (for dealing with construction permits, getting electricity, property registration, and so on) are totally avoided. At the same time, there is a dearth of skilled government staff designated at various levels to ensure the speedy setting up of new businesses. The National Skill Development Corporation (NSDC) and similar institutions are yet to have a tangible impact in addressing this critical issue. A ‘how to do business’ manual prepared by each state government would be another step in this direction that could make things a lot easier for those interested in starting enterprises in various sectors within the same region.

It is easy to give speeches on promoting a unified vision of inclusive growth for the country to succeed, or include it in party manifestos, but what eventually matters is the implementation of effective, prompt action to achieve this vision. Unfortunately, the idea of India as an emerging land of opportunities for entrepreneurs to start up and do business will wither unless the state can step up and take concrete measures to remedy the situation.

Deepanshu Mohan is a Senior Research Associate at the Jindal School of International Affairs, O.P. Jindal Global University.

Comments are closed.

Support Quality Analysis

The East Asia Forum office is based in Australia and EAF acknowledges the First Peoples of this land — in Canberra the Ngunnawal and Ngambri people — and recognises their continuous connection to culture, community and Country.

Article printed from East Asia Forum (

Copyright ©2024 East Asia Forum. All rights reserved.