It’s easier doing business in India now, but starting up is still hard to do

To open a restaurant in New Delhi, one needs 26 licences. By contrast, according to the Economic Survey, opening a restaurant in China and Singapore needs only four licences. (Pradeep Gaur/Mint)

NEW DELHI : India has leapfrogged 79 places from 142 to 63 in the World Bank’s ease of doing business rankings but Asia’s third-largest economy still has a long way to go when it comes to “the ease of starting a business”.

Sample this: if you want to start a restaurant business in New Delhi you need 45 documents to obtain just one of 26 licences—one for getting a clearance from the Delhi Police. But if you want to own a gun, you need only 19 documents to get the go-ahead from the police.

This startling admission came from none other than K.V. Subramanian, chief economic adviser to the finance minister at a press conference in New Delhi on Friday. He was making the case for doing away with unnecessary controls.

According to Sanjeev Sanyal, principal economic adviser to the Indian government, getting the go-ahead from the police was one of 26 licences needed to open a restaurant in the Indian capital. An entrepreneur wanting to start a restaurant business in Bengaluru needs 36 licences while those in India’s financial capital Mumbai need 22. “Each one of these (licences) requires those kinds of documents…In fact, you need special permission for signage, for music, for even bicycle delivery,” Sanyal said.

By contrast, according to the Economic Survey, opening a restaurant in China and Singapore needs only four licences.

Since assuming office in 2014, the Narendra Modi-led National Democratic Alliance government has pledged to improve the ease of doing business in India, reducing the numbers of forms to be filled to start a new enterprise in a bid to boost manufacturing in India and generate jobs.

While it has had some success, more needs to be done, according to the survey. Where India continues to lag is in “parameters such as Ease of Starting Business,” with the World Bank placing the country at the 136th spot in 2019, the Survey said. In registering property, India ranked 154, in paying taxes it was at 115 and where enforcing contracts were concerned, India was a lowly 163, according to the World Bank, the survey said. The World Bank ranks 190 countries based on 10 benchmarks.

“The findings clearly show the large scope for improvement in all categories. While it takes approximately four years to enforce a contract in India; New Zealand, Indonesia, China and Brazil require 0.6, 1.2, 1.4 and 2.2 years respectively,” the survey said. “With a rank of 163 out of 190 nations in enforcing contracts, only a few countries like Afghanistan, Mozambique and Zimbabwe perform worse than India,” the survey said.

For registering property, “it takes roughly 58 days and costs on an average 7.8% of a property’s value to register it,” the survey said adding that it took 1,445 days for a company to resolve a commercial dispute through a local first-instance court. “These figures are longer in time and often greater in cost than OECD (Organisation for Economic Co-operation and Development) high-income economies, and therefore, impede wealth creation,” the survey said.

“Today, it takes an average of 18 days to set up a business in India, down from 30 days in 2009. On the other hand, New Zealand has a seamless process of business incorporation which takes place through a single-window via one agency. It just takes half-a-day with a single form and minimal cost to set up a business in New Zealand,” the survey said.

“Manufacturing units have to conform with 6,796 compliance items, which is a tedious and time-consuming task,” it said adding this was “just an illustration of the bewilderingly wide range of rules that the (manufacturing) sector faces.” Goods manufactured in India “can take 7-10 days to reach a port whereas in countries like China, Bangladesh and Vietnam it takes less than a day.

It said India must streamline logistics at sea-ports with coordination between the logistics division of the ministry of commerce and industry, Central Board of Indirect Taxes and Customs, ministry of shipping and the different port authorities. “The processes for imports, ironically, are better than those for exports,” the survey added.