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Why it's still difficult to do business in India

By Rahul Jacob
December 05, 2019 18:50 IST
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Do a straw poll of any business friends and you will laugh and weep at what they go through, points out Rahul Jacob.
Illustration: Uttam Ghosh/Rediff.com

 

In the midst of drinks last Saturday with an ex-colleague, the conversation took an unexpected turn.

If he wanted to return to India, his wife declared, he would need to hire a secretary or marry again because she never wanted to be involved in applying for an Indian visa again.

She was joking of course, but it was a reminder of how difficult the process of getting permissions to travel to India even in an age of electronic visas.

My friend's rites of passage had been complicated by the fact that he used to be a foreign correspondent in this country.

What additional security benefits accrue by asking visitors to list every Indian city they have travelled to, for instance? Asking an Irishwoman, meanwhile, if she has Pakistani ancestry is a bit silly.

Five years ago, a Singaporean friend said he would not revisit the country after he was interrogated as he did not have the special permit to return to India within a month of arriving here.

He needed to catch a connecting flight.

A 70-person business delegation from China had to cancel meetings in India because the visas did not come through in time -- and this is just weeks after Prime Minister Modi and President Xi Jinping were sipping coconut water on a beach.

Our capacity to make visas difficult has meant we have handicapped our ability to capture the more than 10% of global GDP and 27% of global services exports that come from travel and tourism.

There are few more labour-intensive industries for a country with a low-skilled workforce such as India's than tourism.

Yet, this is just a microcosm of how difficult it remains to do business in India -- or even just get here.

For that reason, the Modi government's focus on moving up the ease of doing business rankings of the World Bank is admirable and the jump to 63 in a few years spectacular.

Yet anyone courageous enough to run an honest business in India must wonder about the weighting of parameters for this list.

True, the bank's survey says India remains well behind when it comes to enforcing contracts and registering property.

'It takes 58 days and costs on average 8% of a property's value to register it,' the bank says.

About 1,445 days is needed for a company to resolve a commercial dispute through a local court, almost three times as long as it takes in high-income economies.

Do a straw poll of any business friends and you will laugh and weep at what they go through.

I asked one about the permissions and licences required to build a hotel.

There are almost 70 needed.

Moreover, a number require the permission of the police; operating a swimming pool needs our cops to wade in to the matter but also approval from a fire safety officer.

Bars in hotels are allowed to be open for 24 hours in Delhi, but music must stop at 1 am. (Surely a hotel's guests can use tripadvisor to forcefully complain if hotels play music too loud?)

The Delhi government's recent diktat that alcohol must be thrown away if it has been open for about a week should get an award.

How is this a foolproof method of ensuring that alcohol is not adulterated?

Then, there are our courts.

They are not as speedy as the government in seeing an opportunity for revenue enhancement but -- as the Supreme Court's ruling that telecom companies pay billions of dollars in back taxes going back years shows -- about are as unpredictable.

Vodafone CEO Nick Read's straight talk of a few days ago might have upset telecom ministry officials, but a collective 3 billion euros writedown of Vodafone's India business to zero speaks volumes.

Even the tabloids in London are covering this saga as if it were a Prince Harry rant.

The giant torture chamber that doing business in India represents means a business journalist is never short of material.

Sometimes, it cuts close to home.

This summer I moved from Hong Kong to Bengaluru.

The forms sent in advance for customs clearance required 25 signatures.

Then, a week before my shipment arrived, I was asked to deposit my passport, my taxpayer identity card and my Aadhaar with the handling agent dealing with Chennai customs, ostensibly to prove where I lived.

A page in my passport stamped by customs now declares that on 28/6/19 I brought 'annexure II and III of goods worth Rs 75,000' and other personal goods (including faded old clothes, mildewed books and pots and pans) worth Rs 1 lakh.

My music system, which includes a 15-year-old compact disc player with a tray that needs a nudge and speakers I bought in 1988, was slapped with about Rs 9,000 in import duties after being grandly described on the receipt as a 'home entertainment system'.

There is a method to the madness.

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Rahul Jacob
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