In his recent visit to India, Intel’s
Craig Barrett said something quite ominous. Since he
said it politely with elegant caveats, and since it
was but a part of many good things that he said, the
comment merited small headlines in the pink papers.
Shorn of politeness and provisos, this is what
Barrett had to say: While India is an exciting
prospect for Intel, long delays in getting
government clearances are making the management
favour investing in China and Vietnam over India.
Barrett’s was a powerful wake up call. We can praise
India’s growth to the skies. But we must recognise
that there are huge hassles for MNCs and others in
setting up and running businesses in India. Consider
some facts culled from the World Bank.
In 2006, India ranked 134th out of 175 countries in
terms of the ease of doing business. China ranked
93rd; and the relatively tiny Vietnam ranked 104th —
30-points higher than India. In terms of dealing
with licenses and sundry government permissions,
India ranked 155th; China was only marginally better
at 153; but Vietnam was way ahead at 25th position.
As far as registering property was concerned, India
was placed 110th, versus China at 21 and Vietnam at
34. Regarding flexibility in hiring, utilising and
retrenchment of workers, India was 112th, compared
to 78 in China and 104 in Vietnam.
Now come the real party poopers. In exports and
imports, our still cumbersome procedures ranked
India at no.139; China was 38th, and Vietnam 75th.
We fared abysmally in the ease of enforcing
commercial contracts: ranked 173rd (i.e. only two
countries in the world are worse than us), versus 63
for China and 94 for Vietnam. And our monstrous
difficulties in winding-up ranked India at 133rd in
the ease of closing business, compared to 75 for
China and 116 for Vietnam.
All these hassles have to do with the government and
the judiciary: centre, state, districts, municipal
entities and courts. All involve multiple
permissions — often sequential and occasionally
conflicting in their remit — which take far too long
to be resolved. Let me now give you a live example.
To begin with, a disclosure. I serve as an
independent director on the board of Cairn India
Limited, a company listed on Indian stock exchanges.
What I write here are bald facts, bereft of any bias
that could accompany my fiduciary position.
Cairn discovered India’s largest on-shore oil
reserves in the district of Barmer in Rajasthan. The
original agreement was that Cairn would be paid for
evacuating the crude at site (the ‘point of
delivery’), which would then be carried by a public
sector company to southern Rajasthan and Gujarat by
a pipeline constructed by that enterprise.
By end-2006, it was clear that the public sector
company was not going to be able to construct the
pipeline. Since no pipeline meant no oil for the
nation (you need to ship the crude out of Barmer),
Cairn offered to build the pipeline with cost
recovery. That required two permissions from the
Ministry of Petroleum. The first was to permit
shifting the ‘point of delivery’ of the crude from
Barmer to the end-point of the pipeline and, hence,
right of access. And the second required recognising
Cairn as the pipeline contractor for getting cost
The file made interminable rounds in the ministry
for over six months. Eventually, Murli Deora, the
minister, was given the full picture of the delays
and what it was costing the nation. Deora, to his
credit, immediately sanctioned the project. Guess
what? Even after the minister’s approval, a civil
servant in the ministry succeeded putting such
onerous caveats in the last paragraph of the
sanction letter that it has become impossible to
proceed without these being removed.
Bureaucracy is delaying a project which happens to
be India’s largest on-shore find. For reasons that
are beyond my comprehension. Except one: lack of
concern about the cost to the nation. Yet another
example of hassles of doing business in India. And
why Craig Barrett said what he did.
Published: Business World, September 2007