No Country For Doing Business



The World Bank’s Doing Business 2013 report is depressing reading. India has not risen in the global rankings, remaining the 132nd most difficult place to do business. It is a small miracle it has not fallen since in the 10 indices that determine ranking, it improved in only two of them, fell in six and stayed the same in two.

The sharpest drop was in “getting electricity” which went from a ranking of 99th worst in the world to 105th. No surprise: this was, after all, the year of the Great North India Blackout. But the Pranab Mukherjee effect is relatively clear to see: harder to pay taxes, less protection for investors and more difficult to go insolvent in a sensible manner.

Presumably India stayed in one place because other countries did even worse – somewhat hard to believe.

There is a narrower concern that I will focus on. Namely, that light manufacturing is fleeing China as its wage costs keep rising and, to some degree, it becomes increasingly unfriendly to foreign (especially Japanese) business. But as a UBS study noted some months ago, these jobs are going to Vietnam, Bangladesh, Indonesia but, surprisingly, not to India.

I got another sense of how difficult running a manufacturing setup is in India recently while listening to a West Asian businessman who has a textile plant in Maharashtra.

Here’s what his few years of experience in India taught him about the business environment. It more or less confirmed by overall sense that the Indian government and bureaucracy are a barrier to the country’s development and the Indian people remain its greatest asset.

First the problems. Though India has one-tenth his country’s per capita income, the only cost that is competitive in India is its labour. Everything else: transport, power, water, whatnot, are all more or the same expense. That alone would probably reason enough why no one is moving their factories from China to here.

He said caste, ethnic and religious differences didn’t matter on the factory floor. But Indian workers are very bolshie and, strangely, ignore their union leaders on a regular basis.

He said Indian banks are inefficient and ponderous. They make all sorts of ridiculous charges, inflexible about the terms of credit and generally useless. It makes little difference if they are private or state-owned.

But the real nightmare in India is the tax structure. It is not that it is somewhat high, what is the worst aspect is that it is incomprehensible. Taxes change every few kilometres. The multiplicity of charges makes little or no sense. “After four years I still do not understand how the tax system works,” he said.

Take a look at Mukherjee’s last budget which has over 20 clauses that say the income tax officials will have the discretion to decide what the tax charges should be. Here’s a point of view: India will remain the permanently emerging economy if it doesn’t get the general services tax reform passed one day.

He waived off corruption though. Bribes are needed to accelerate government processes but they are small — $ 50 on average, with an annual cost of $ 4000 or so. I suspect if he had been in real estate or an industry where government discretion is far greater the song would be different. Nonetheless, it bodes well for manufacturing if other things can ever be resolved.

His praise, however, was for Indian managers. His factory had no expatriates, everything was run by desis. Indian customers were sophisticated and brand conscious. Profit margins were steady if low because of Indian price consciousness. But cash flow was positive from the word go.

Today corporations are the main source of government tax revenue, the main source of new employment and were, until recently, the main source of investment in the country. Even if you believe in a welfare state and all that stuff, you need government revenue to pay for it. And this means making it easier to do business. Which is not happening. Which is why government revenue is stagnating. And why the present welfare programmes are increasingly unaffordable.

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  • Karan

    Sujata, you obviously don’t know that the MNS got over 1.5 lakh votes in Mumbai South.

    “I do not think the MNS has any presence in South Bombay”

    It’s shameful that HT has resorted to publishing pieces by useless simpletons like you who couldn’t even spell politics

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  • Anil Chopra

    Having been part of the fashion week’s journey over 12
    years, my comments; Lakmé India Fashion Week (LIFW) started in year 2000, prior
    to which there were no fashion weeks. LIFW met with a huge response from
    designers, buyers, media, sponsors and end customers of fashion products. LIFW
    for 6 years was held once a year rotating between Delhi & Mumbai. By 2005
    it gave an opportunity for 35 shows with 50-70 designers showcasing. Most
    designers were established names showing year after year, with little
    opportunity for new & young designers. Talent consisted of 32 models, 3 choreographers
    and 3 makeup artists along with 100+ buyers & select media attending. The
    event became a rich source of sponsorship revenue for FDCI. With interest in
    fashion rapidly spreading across the country, the event did not provide
    adequate opportunities for designers who wished to participate, particularly
    the younger and emerging ones.

    Lakmé Fashion Week (LFW) was launched in 2006 at Mumbai.
    Certain vested interests at FDCI saw this as a threat to its monopoly and
    employed many unfair means to stop LFW from succeeding. LFW and FDCI moved into
    two fashion weeks a year in keeping with seasonal requirements. Hence, from one
    LIFW a year it became four, two LFWs in Mumbai and two Wills – FDCI in Delhi.
    There was huge uproar created by ‘interested parties’ stating there was no room
    in India for four fashion weeks. This was proved to the contrary by the response
    to all four being immensely successful. Inspite of this, efforts continued to
    scuttle LFW, till the MRTPC verdict against FDCI and several senior designers
    supporting initiatives of nurturing young and new talent at LFW. The success of
    Gen Next shows at LFW has become a rich source of young talent which over the
    last six years has produced many an outstanding designer who compete
    effectively with the old stalwarts from the LIFW days.

    Between these four events it now generates opportunities
    for 200+ designers to showcase along with 100+ models, 8-10 choreographers and makeup
    artists, stylists and host of support talent such as set designers, lights/sound
    & music experts. The attendance from buyers across the country including
    small towns has multiplied with each event getting 200+ registrations. Media
    interest has been enormous, with 350 registrations for each week. This has
    attracted several sponsors too. From a ‘boutique’ event 10 years ago with
    limited potential, the LFW & Wills events have become an industry
    generating business and employment for many. This can be sustained, like in any
    other industry, when there is sufficient demand from end customers of fashion products
    across India.

    On the issue of new fashion opportunities or weeks, in a
    free and open market the end customer will decide whether it is a success or
    not. Already some have succeeded while many failed. The market place & end customer should be the one taking this
    call and no one else. Those using unfair means to stop a new initiative should
    look back into history! Anil Chopra

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  • Mullah

    Bad Breaking News for the Muzzies: Please forget your magical concept of heaven, hell and 72 virgins. Near-death experiences occur when the soul leaves the nervous system and enters the universe, claim two quantum physics experts. Please Google for ‘Quantum Physics dailymail’ and click on the first search result. This has opened the doors for reincarnation. Also, check out hinduismworldwide(dot)in for Western Science’s validation of Vedanta. All the best Muzzies.

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    Human Reply:

    Hope.. your vedanta also has scientific validation of how people born from Brahmma’s various body parts and only suthra born from penni. :)

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  • Spot on

    Mia, this news article of yours is for consumption of Pak citizens, please migrate their as your ideology and mindset more suitable for living and working there.

    Lately you have become intolerant of India. Now you have started writing about neighboring country that’s good as we Indian are spared of usually being anti muslim.

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    Azhar Hussain Reply:

    little praise or positive news about Pakistan you people start barking at the writer. Relax we should arrange trips for more you to have your open eyes and minds. Cheers

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    shimr choudhary Reply:

    hindus are bunch of idiots their minds are closed.victims of brhmnst/zoinist propaganda machinary.least knowledged english speaking gang of idiots.live on propaganda,pass their life on hoarding and stealing.

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    Faulitics Reply:

    Here comes another arabized idiot. There are just too many of these types for comfort.

    Faulitics Reply:

    What’s positive about a bunch of fanatics preventing girls from going to school and blowing up girls schools? Do you want such people where you live? Your brain seemed to be wired differently. Strange one.

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  • Spot on

    Mia, this news article of yours is for consumption of Pak citizens, please migrate their as your ideology and mindset more suitable for living and working there.

    Lately you have become intolerant of India. Now you have started writing about neighboring country that’s good as we Indian are spared of usually being anti muslim.

    [Reply]

  • fairworldwide

    Malala Yusufzai deserves sympathy for her suffering like other girls who suffer just like her or even more in FATA. Behind all this hype, she is a propped up leader created by a power hungry father out of an ordinary girl whose sole merit is her looks. The statement “Malala Yusufzai symbolizes Pakistan” is a metaphor. She symbolizes the lies, deception, hypocrisy, and duplicity of Pakistan. Her father possesses the Pakistani skill to dupe the world and reap benefits for his daughter through parroted instructions, while secluding his wife, like any fanatic Muslim. Pakistani government manipulates this incident to cover up all their evil activities and bask on reflected sympathy. They succeeded in making the world forget that they are protecting the terrorists as a state policy. Propping up a leader out of an ordinary girl lacking much virtues; by money and influence is a deplorable precedence. There are plenty of children all over the world with more virtues than Malala Yusufsai. The hype attributed to her is an injustice to many deserving children manifesting more kindness, compassion and selfless motivation. Please look at the video clip youtube.com/watch?v=9F5yeW6XFZk and reason out whether this girl have virtues, to justify the accolades being bestowed up on her.

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    aswathy Reply:

    Her cruelty to her so called pet reveals her mean mentality. Her father demanding fees from parents when the whole place is war ravaged shows his merciless nature. good video. dont know why people praise them. she is a mean girl to demand ice cream in such times.

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    Iac Thiruvananthapuram Reply:

    The way she shouted “valley valley swat valley” is as mechanical and insincere as Chaprasi Singh or Sonia reading a speech. That courageous girl who tried screening Malala with her bare hand and severely damaged her hand deserves a thousand times more appreciation than this propped up leader.

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    Faulitics Reply:

    Dude, Taliban are real and they are fanatical murderers. It needs courage to openly say things against them. This girl has a lot of courage. I would go as far as saying that this Pakistani girl has more balls than all the Pakistani males put together.

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  • REX

    for 6 years sared hindu zoinists were planting the bombs and muslims were blamed and cursed.at the end they are cught and and imprisoned.SAME WAY ATTACKERS OF MALAL ARE ZOINISTS NOT TALIBANIS.TRUTH WIL COME OUT SOON

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  • vijay !

    I have only heard of malala from newsreports.

    She could be a symbol of hope of the hapless tortured woman of Pakistan and Afghanistan. The voice agaisnt the hopeless Sharia and the geder unequal Muslim personal law.

    I hope she comes out of the injury and takes on the mad fanatic Mullahas who want to convert the world and repress women into medieval ages.

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  • Plumbline

    Jesus Loves the World………

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