Ease of Doing Business taken care of; next frontier, COST of Doing Business

India is consistently improving on the Ease of Doing Business ranking, but there is still large scope in matching the pace with peers on the cost incurred in carrying out those businesses. The ‘cost of doing business’ in various areas in India is much higher than that in many other countries. “Estimates put India’s logistics cost between 14 per cent of GDP compared to a ratio between 8-10 per cent for countries like the US, Hong Kong and France,” says a FICCI report. Also, over the years, the turnaround time at ports has reduced but it is still much higher among other major economies.

For instance, the port turnaround time in India is 64 hours, compared to 10 hours in Taiwan, 12 hours in Korea, 19 hours in Singapore, 20 hours in China, and 22 hours in Malaysia. There are many other roadblocks that exist in India, reducing the competitiveness of industries. Land, labour, capital, power and logistics are major factors to increase the cost of doing business in India, the report said.

“Acquiring land and generating capital like taking bank credits in India are costlier than its peers. These can be brought down to make India more suitable for businesses,” Sushil Kumar Sarawgi, Director, KOR Energy, told. Taxes should be further cut for MSMEs, he added.

The FICCI report also suggests that there is a need to implement and expedite the factor market reforms at the centre as well as the state levels. Power is an area that is posing serious challenges as the balance with its supply is still distorted. On top of it, high power costs is another concern, which can be addressed by a suitable mix of energy sources including that of renewable and non-renewable sources.

The move may also likely reduce India’s overall dependence on oil imports, boosting the economy and curating the trade balance. Oil is the largest import of India, thus the fluctuation in dollars largely impact the country as well.

Meanwhile, reducing the cost of business along with increasing the ease can make India a much more favourable destination in establishing new businesses, that too, at a time when many companies are looking forward to shifting their bases from China.