Ease of Doing Business
India and China are two of the world's largest economies, with a combined population of over 2.7 billion people. Despite their vast differences in culture, history, and political systems, both countries are often compared in terms of their economic growth and development. One area of comparison that has gained prominence in recent years is the ease of doing business in these countries.
The Ease of Doing Business (EODB) index is an annual ranking published by the World Bank, which measures the ease of starting and operating a business in different countries. The index uses a range of indicators, including the time and cost of starting a business, obtaining permits and licenses, getting electricity and credit, and enforcing contracts. A higher rank on the index indicates a better environment for businesses to operate in, while a lower rank implies more obstacles and challenges for entrepreneurs.
According to the latest EODB report, published in 2021, India ranked 63rd out of 190 countries, while China ranked 31st. While both countries improved their rankings compared to the previous year, China performed better overall. However, this is not the whole story. When it comes to specific indicators, the two countries show some interesting differences.
For example, in the category of starting a business, India ranked 136th, while China ranked 15th. This is primarily due to the significant bureaucratic hurdles and delays that entrepreneurs in India face when setting up a new business. In contrast, China has made significant efforts to simplify its business registration process and reduce the time and cost involved. In addition, China also ranked higher than India in categories such as getting electricity and enforcing contracts.
However, India performed better than China in certain areas such as protecting minority investors, where it ranked 5th globally, while China ranked 92nd. This indicates that India has better legal and regulatory frameworks in place to safeguard the interests of minority shareholders in companies. Additionally, India has made significant progress in digitizing its business registration process, which has reduced paperwork and improved transparency.
Another area where India has made significant progress is in improving access to credit for small and medium-sized enterprises (SMEs). India's Insolvency and Bankruptcy Code, which was introduced in 2016, has streamlined the process for resolving insolvency and has made it easier for SMEs to access credit. This has led to a significant increase in the number of loans granted to SMEs, which has been a major driver of economic growth.
In contrast, China's banking system is dominated by state-owned banks, which tend to favor large, state-owned enterprises over smaller, privately-owned businesses. This has created a significant funding gap for SMEs, which have struggled to access affordable credit. However, the Chinese government has recognized this issue and has taken steps to address it, including launching a new Nasdaq-style stock exchange for SMEs in 2019.
Overall, while both India and China have made progress in improving their business environments, there is still room for improvement. India's bureaucratic hurdles and delays remain a significant barrier to entrepreneurship, while China's dominance of state-owned banks has created funding gaps for SMEs. However, both countries have demonstrated a willingness to address these issues and make their economies more business-friendly.
In conclusion, the ease of doing business in India and China is a complex issue that cannot be reduced to a simple ranking on a global index. Both countries have their strengths and weaknesses when it comes to creating a business-friendly environment, and each has its unique challenges. However, as two of the world's largest and fastest-growing economies, it is essential that both India and China continue to make progress in this area to sustain their economic growth and development.
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