India powers South Asia growth: World Bank report

Thanks to India, South Asia picked up the pace of regulatory reform over the past year to become the second-fastest reforming region in the world, on par with the speed of reform in the countries of the Organisation for Economic Co-operation and Development, the annual World Bank report titled Doing Business 2008, has said.

Last year, the report had said that South Asia had ranked lowest in the rate of reform, but this year -- the Bank in the fifth annual report series brought out jointly with its affiliate the International Finance Corporation -- the private sector arm of the Bank -- said that two-thirds of the countries in the sub-continent had at least one reform.

The report clearly acknowledged that the pickup in reform was led by India, which rose 12 places on the ease of doing business and made the reform of business regulation a policy objective.

"India was the top reformer worldwide in trading across borders," it said, and credited Bhutan and Sri Lanka as being "the other top reformers in South Asia this year."

The report said that Bhutan had introduced the country's first fundamental labor protections, while Sri Lanka had made it easier to start a business and to trade across borders.

It said that reformers made it simpler to start a business, strengthened property rights, enhanced investor protection, increased access to credit, eased tax burdens, and expedited trade while reducing costs.

While Singapore, for the second year running, topped the aggregate rankings on the ease of doing business, the top ranking countries in South Asia were Maldives (60th on the list) and Pakistan (76), while India improved its ranking to 120th this year, which according to the report "was a bigger gain than China, which rose by nine places to 83rd."

Michael Klein, World Bank/IFC president for Financial and Private Sector Development, stating the obvious, declared: "The report finds that equity returns are highest in countries that are reforming the most."

He said that "investors are looking for upside potential, and they find it in economies that are reforming -- regardless of their starting point."

Klein noted that "large emerging markets are reforming fast -- China, India, Malaysia, Vietnam, and Egypt all improved in the ease of doing business. The report also finds that thanks to regulatory reform, more businesses are starting up."

The report said that "India is now setting the standard for reform in South Asia, with an explicit policy objective to become a leading business-friendly economy," and added, "Besides, making it easier to trade across borders, India increased access to credit by expanding credit bureau coverage to individuals as well as businesses. It also introduced an electronic registry for security rights granted by companies."

It said that one way to spur reforms was to compare cities within a country, and pointed out that the time to obtain a business license in India ranges from 159 days in Bhubaneshwar to 522 in Ranchi. The time to register property ranges from 35 days in Hyderabad to 155 in Kolkata.

The report said that if the top score among Indian cities in each of the Doing Business indicators were used for the country as a whole, "India would rise 55 places in the aggregate country rankings."

It lauded the Indian government for using this information to plan further reform.

Finance Minister P Chidambaram, during an address to the Peterson Institute for International Economics on 'India's Economic Growth and Outlook,' said in the three years and four months since the present government assumed office "the government has brought greater stability and clarity to the policy environment."

"In many cases," he noted, "the policy is backed by law or regulation. In key sectors, government has ceded authority to independent regulatory bodies."

The Bank report also found that higher rankings on the ease of doing business are associated with higher percentages of women among entrepreneurs and employees.

Melissa Jones, an author of the report said that "the benefits of increased regulatory reform are especially large for women. Women often face regulations that may be aimed at protecting them. But the effect is counterproductive, forcing women into the informal sector, where they lose out on job security and social benefits."

The rankings are based on 10 indicators of business regulation that track the time and cost to meet government requirements in business start-up,operation, trade, taxation, and closure.

The rankings, however, do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.