Rajesh Kumar explains why, despite the FDI, India still remains a business-unfriendly place, ranking at 132nd of the 185 countries in Doing Business 2013, a study conducted by the International Finance Corporation, well below Sri Lanka (89) and even Bangladesh (129):
For those, both in and outside the government, looking for ideas for real economic reforms, the study has plenty to offer. For example, India is ranked second from last in the world in contract enforcement, the very basis of a functioning market economy. It is virtually impossible for an economy to move to a sustained growth path without having an efficient contract enforcement mechanism in place. The time taken to fight a dispute in Indian courts is roughly three times more than that in OECD countries. Similarly, India has been ranked 173 on starting a business, a slippage of four places, while on the issue of resolving insolvency, its rank is 116, a slippage of seven positions. The study suggests that both starting and liquidating business is rather more difficult here when compared with the rest of the world. And things have gotten worse in the past year.
These numbers will have to change dramatically in the future if India has to return to high growth and if it is to generate jobs. Just opening a few sectors to foreign investment in the name of reforms will not do the trick. Forget grand ideas such as reforming labour laws and the like, India needs to undertake far more basic tasks to become a good place for doing business.
These basic tasks that are not yet in place include difficulties with starting a business, lack of investment and investor protection and a lack basic infrastructure like electricity. While Kumar is talking specifically about foreign investments in the country, the very same problems and deficiencies tend to affect startups and new businesses within the country. These are problems with the ecosystem at large, which can only begin to be solved when the private, social and government sectors work in coordination with each other to transform the situation into a friendlier and more reliable one.