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Ease labour norms to make India attractive to outsourcers

September 25, 2009

India has improved its rank by two percentile points from 2008 in World Bank’s Doing Business Survey 2009 with reforms introduced in at least five key areas (Out of 10 sets of quantitative indicators studied across 181 countries by the World Bank over five years) doing business in India is still not a child’s play.
Outsourcers to the emerging economy will vouch for the fact that the processes are still riddled with major roadblocks, needless red tapism and stifling bureaucratism, notwithstanding a few notable improvements related to technology, implementing electronic registration of new businesses, establishing an electronic collateral registry and the provision of online submission of customs forms and payments.
This is clear from the adjoining table. In contrast, China has improved on its rank with a major focus on easing access to credit. In 2006, a new credit registry allows than 340 million Chinese citizens to have credit histories for the first time.

A co-publication of the World Bank, the International Finance Corporation, and Palgrave Macmillan, Doing Business 2009 indices cover all ages and stages in the life span of a company from starting a business to gaining access to credit, securing permits, protecting investors, paying taxes, trading, enforcing contracts, and yes, even closing a business, if need be.

attractiveOutsource-300x194 Ease labour norms to make India attractive to outsourcers
The report ranks 181 economies with the lowest score being the least burdensome environment and the highest being the most costly. The figure below illustrates the rank for leading offshore locations.
For a detailed comparison of India with other emerging economies, log on to this site.

In India’s case, the biggest bane is the rigid labour laws. There are several past studies that have found that increasing the flexibility of labor regulations and simplifying entry regimes would make many offshore destinations, particularly India, Brazil and the Russian Federation, highly attractive.

For instance, a study of 1,948 retail stores in large Indian cities found that 27% investors see labor regulations in India as a roadblock to their expansion plans. Such reforms in the two Indian states of Andhra Pradesh and Tamil Nadu in contrast have increased manufacturing output by 15%.

However, in Left-ruled West Bengal, outdated labor laws have cut output by almost 20%. The result? There are some 1.8 million extra urban poor in West Bengal than in these two southern states, cites the World Bank report.


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Comments

2 Responses to “Ease labour norms to make India attractive to outsourcers”

  1. Software Development Company on September 26th, 2009 1:09 am

    Flexibility of labor regulations and simplifying entry regimes will give Indian outsourcing companies cutting edge over the many other preferred destinations. The superior skillsets and the proficiency in English is a clear advantage to India.

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