India most difficult place to do business in S Asia, save Afghanistan

New Delhi, Jul 13 (UNI) In what may come as a rude shock to policy makers, a World Bank Report released here ranks India a poor 120th out of a total of 178 countries on an index measuring ‘Ease of India Business’, putting Pakistan, Bangladesh, Bhutan, the Maldives, Nepal and Sri Lanka ahead of it.

In South Asia, only Afghanistan has a lower rank (159) than India.
''With poor performance in the sub-category ‘Enforcing Contracts (177th), India’s Ease of Doing Business’ overall rank is 120th (out of 178), which, although a substantive improvement over its previous rank of 132, still reflects a generally poor business environment,'' the Report says.
The Report says India’s governance environment is relatively more favourable than the average South Asian or Low Income Countries and is an improvement from the situation in the early 2000s.

''With severe power shortages, congested roads, and poor quality railways and ports, deficient infrastructure is a major binding constraint to trade activity in the country.''
A presentation of the Report--World Trade Indicators 2008—was made by Dr Gianni Zanini, Lead Economist and Trade Programme Leader,The World Bank.
The following are the Rankings of other South Asian countries on the ‘Ease of Doing Business’ Index: Maldives (60); Pakistan (76); Bangladesh (107); Sri Lanka (101); Nepal (111) and Bhutan (119).

The Report says on an average, South Asian states have one of the worst business environments across all regions. None of its countries are in the top 50 in the ‘Ease of Doing Business’ rankings, and only two are in the top 100--Maldives and Pakistan.
For some of the smaller countries in the region like Nepal, Bhutan, and Sri Lanka, political instability continues to be a problem, especially for Foreign Direct Investment(FDI), new business development and growth in their important tourism sector.

''While India has achieved substantial reductions in tariffs since the nineties and the current external environment is relatively favourable compared to Low Income and South Asian country group averages, India’s agriculture exports face high barriers and its share of trade with preferential partners is low,'' the reportsays.

Dr Zanini said along with improvement in trade facilitation, real growth in trade and related jump on trade integration has been high, driven by high import requirements of a booming economy and services exports.

Globally, over the past decade, countries with lower barriers tended to have stronger, more consistent trade and export performance, the WTI 2008 says.

Nonetheless, India surpasses its comparators on nearly all aspects of the 2006 Logistics Performance Index with a rank of 39 out of 150 countries.

Its strongest logistics indicator was timeliness of shipments, while its weakest were efficiency of customs and other border procedures and quality of transport and information technology (IT) infrastructures.

It also ranked India 79th on the ‘Doing Business-Trading Across Borders’ sub-category, a dramatic improvement over its previous year’s rank of 142 on account of substantive reductions in the average cost (per container) and time required to trade acrossborders.

While still fairly low, India’s per capita rate for telephones and mobile phones (19 per cent in 2006) is thrice of its early 2000s mean, while Internet usage (10.8 per cent) is more than seven times its early 2000s mean.

Both are higher than the Low Income country averages. Its 2005 secondary school enrollment ratio of 54 per cent is higher than both the regional and income group comparator means.The Report states that in the matter of trade policy, India has been moving towards a market-oriented trade regime since the early 1990s and its tariff protection has been substantially reduced.

Nonetheless, judging by the latest ‘Trade (MFN) Tariff Restrictive ness Index’ (TTRI), India is ranked 117th out of 125 countries.

In short, the country’s trade regime is much more restrictive than other large emerging economies like Brazil, China, Mexico, and Russia.

In agriculture, the country’s average tariff of 42 per cent is about seven times that for non-agricultural products (6.4 per cent) and one of the highest in the world. MFN duty-free imports were only 7.8 per cent of total merchandise imports in 2005. The 43 per cent (1997) non-tariff measures frequency ratio is one of the highest in the world.

With respect to services, the Report notes that reforms have been pursued recently in such sectors as banking, telecommunications, electricity, insurance, retail, and highereducation, albeit at a slow pace and with varying degree of success.

Talking about the ‘GATS Commitments Index’, the Report suggests ample room for far greater multilateral commitments to services liberalisation.

As for market access, India is ranked 59th out of 125 countries on the latest Market Access TTRI (including preferences), Indian exports face more favorable access to foreign markets than its comparators.’ More than a third (35 per cent) of its exports were MFN duty free, significantly higher than the regional mean (26.4 per cent).

However, India's agricultural exports face significant tariff barriers--the 2006 rest-of-the-world applied tariff (weighted) average for agriculture products (10.3 per cent) was more than twice that for non-agriculture exports (4.3 per cent).

Real growth of trade was 11.5 per cent in 2007, higher than the 2005-06 average, but slightly lower than the high growth rates of the late 1990s (13.3 per cent) and early 2000s (12.5 per cent).

Imports have grown faster than exports in recent years, reflecting the growing demand of India’s booming economy, especially for energy and infrastructure, the Report says.

The country’s 2007 share of trade in GDP (integration ratio) is 45.2 per cent, a substantial increase over its late 1990s average (24.9 per cent) and comparable to the integration ratios of other large emerging economies like China, Russia, and Mexico, though lower than the regional (73 per cent) and low income group (80 per cent) averages.

The Report says services share in total exports is a high 36.7 per cent, as the country has become a major exporter of professional services. The Report says India's 2007 FDI inflows were still low at 1.8 per cent of GDP. India is the world's largest recipient of remittances, with the figure being 25.4 billion dollars in 2006 or 12.8 per cent of the value of total exports of goods and services.