India’s Business Readiness: A Tale of Contrasts and Lessons from Global Leaders

Dec26

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India stands at a crossroads, balancing its achievements with the need for substantial reforms. As the global economy evolves, India’s journey offers a compelling narrative of resilience, innovation, and the pursuit of excellence

India’s business landscape is one of remarkable dualities. While the country has made significant strides in digitisation and infrastructure, it continues to grapple with regulatory bottlenecks and service inefficiencies. For instance, India’s Goods and Services Tax (GST) has simplified tax compliance, positioning the country as an emerging hub for start-ups. Yet, setting up a business in India still takes an average of 18 days, compared to just three days in Georgia, a top performer in the World Bank’s Business Ready 2024 (B-READY) report (Business Ready 2024).

Contrastingly, the rising tide of GCC (Global Capability Centres) investments in India presents a different picture of India’s attractiveness as an investment destination. Per a KPMG report, nearly 1600 GCCs we established in the country in FY2023. As per EY’s latest ‘Future of GCCs in India –Avision 2030’ report, it is estimated that the domestic GCC market size will reach US$110b by the year 2030, led by software exports, which remains a key component of India’s service exports. It is predicted that by 2030, India will have 2400 GCCs and that number can potentially increase to 2550 as India emerges as the world’s technology and services hub.

The Business Ready 2024 (B-READY) report by the World Bank introduces a transformative analytical framework to evaluate economies on their business readiness. By benchmarking across three pillars – Regulatory Framework, Public Services, and Operational Efficiency – it assesses 50 economies, including both developed and developing nations. The B-READY index is a successor to the Ease of Doing Business rankings, which were discontinued in 2021 due to irregularities. It is a ground-breaking initiative that aims to focus on quantitatively assessing the business environment across world economies.

India’s ability to balance such extremes defines its standing among global economies. As the country aspires to become a $5 trillion economy, it faces the critical challenge of addressing these disparities to enhance its competitiveness. The B-READY report offers valuable insights into where India stands and what it can learn from other nations.

Regulatory Framework: The Paradox of Progress

India ranks high among developing economies in reforming corporate and taxation laws. Policies like the Insolvency and Bankruptcy Code (IBC) have reduced the average time for resolving insolvency from over four years to less than 330 days, according to the World Bank. However, countries like Singapore, Georgia, and Colombia outperform India, boasting scores exceeding 75 in regulatory clarity and ease(Business Ready 2024).

For example, Georgia’s streamlined licensing system allows businesses to operate within hours of application—a stark contrast to India’s fragmented approval processes that span weeks, if not months. Regulatory delays not only increase costs for businesses but also deter foreign direct investment (FDI). While India’s FDI inflow stood at $83 billion in FY 2021–22, it has room to grow compared to Singapore’s $140 billion(Business Ready 2024).

Public Services: Bridging the Gaps

Public services emerge as India’s Achilles’ heel, reflecting the broader struggles of emerging economies. The B-READY report highlights that only 44% of economies globally, including India, have operational courts specialising in insolvency, compared to 92% in high-income nations like Estonia(Business Ready 2024). This inefficiency results in prolonged commercial disputes and legal backlogs.

On the brighter side, India’s Digital India initiative has propelled significant improvements in tax compliance. The GST Network now processes millions of returns monthly, a feat that rivals Singapore’s seamless online systems. However, persistent challenges in infrastructure reliability – frequent power outages and high logistics costs – continue to undermine operational efficiency. Logistics alone accounts for 13-14% of India’s GDP, compared to 8-9% in developed economies, highlighting a critical area for reform (Business Ready 2024).

Operational Efficiency: Rising Momentum with Challenges

India has shown commendable progress in operational efficiency through initiatives like the Production-Linked Incentive (PLI) schemes, which aim to boost manufacturing and exports. Yet, countries like Singapore, which scored 87.33 in the Operational Efficiency pillar, outperform India due to their efficient contract enforcement and transparent judicial systems (Business Ready 2024).

Labor market rigidity remains a critical issue. While India has undertaken reforms to ease hiring and firing policies, implementation remains inconsistent. This stands in contrast to Rwanda, which has simplified labour regulations to attract foreign investors. Addressing labour market inefficiencies could make India a more attractive destination for global supply chains.

Lessons from Global Leaders

Streamlining Regulations: Georgia’s ability to register businesses within hours demonstrates the impact of cutting red tape. India must adopt similar reforms, leveraging digital tools to reduce approval times.
Digitisation: Estonia leads in e-governance, providing businesses with digital platforms for compliance and dispute resolution. India’s advancements in tax digitisation could be extended to other regulatory areas.
Sustainability and Inclusion: The B-READY report emphasises environmental sustainability and gender inclusivity as key to business readiness. While India leads in renewable energy investments, women’s workforce participation remains below 25%. Bridging this gap could boost GDP by 27%, according to McKinsey.
Public-Private Partnerships: Rwanda’s success in aligning government initiatives with business needs underscores the importance of collaboration. India’s infrastructure projects like highways and metro expansions reflect this synergy, but broader implementation is needed.

Data-Driven Reforms: India’s Path Forward

India’s performance in the B-READY report underscores the importance of targeted reforms. With an average of four power outages per month and judicial delays spanning years, the costs of inefficiency are stark. However, the country’s growing digital ecosystem, supported by initiatives like Gati Shakti and Make in India, offers hope for improvement(Business Ready 2024).

India stands at a crossroads, balancing its achievements with the need for substantial reforms.As the global economy evolves, India’s journey offers a compelling narrative of resilience, innovation, and the pursuit of excellence. The lessons from B-READY provide a roadmap for transforming aspirations into actionable reforms, ensuring that India realises its economic potential while becoming a hub for global business.