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Economic Outlook

India ranks 34th out of 60 nations in business growth environment

India has been ranked 34th among 60 leading economies in terms of ‘business growth environment’ but the country has been ranked among the bottom ten when it comes to ‘business operating environment’, says a report.

In the Grant Thornton Global Dynamism Index (GDI), which ranks business growth environments of 60 leading economies, India was ranked at the 34th place, registering a gain of 14 places since the last version of the index, largely driven by a strong and productive workforce.

However, India was ranked 53rd out of 60 in the GDI when it comes to its business operating environment, the report said, adding that “a poorer regulatory environment and a lack of investment in science and technology dragged down India’s overall ranking”.

“India scores high on economic situation and growth (overall ranking 2) and availability of labour and human capital (15) and very poorly on financing environment (36), science and technology (41) and is lowest on business operating environment (53),” Grant Thornton India LLP Partner – India Leadership team, Harish H V said.

“Government of India’s recent efforts in ranking states should help improve India’s ranking further in the next round,” he added.

According to Grant Thornton’s International Business Report (IBR) survey, the strength of India’s GDI ranking for workforce and growth is recognised by many businesses. Six in ten cite low cost labour as a reason to choose the country, while 45 per cent say the availability of skilled workers.

“It is clear that the growth and human capital in India is attracting corporates from across the world into India and the world has noted that the PM has made it a personal priority to improve the business operating environment. This increased interest in India is reflected in the significant growth in India’s ranking in the GDI,” Harish H V said.

On the other hand, international investors also recognise that the country’s business operating environment requires improvement.

According to IBR, 58 per cent of firms operating or looking to operate in the country see local legislation and regulatory requirements as a major challenge of working in India.

Another area of concern are cultural barriers which are cited by 56 per cent of firms.

Globally, Singapore offers the best business growth environment for dynamic businesses as a result of a strong financing and regulatory environment, followed by Israel and Australia in the second and third place, respectively.

Finland and Sweden were ranked in the 4th and 5th place across the world due to favourable business operating environments and an advanced technology infrastructure.

The Grant Thornton Global Dynamism Index (GDI) is an annual research project designed by the Economist Intelligence Unit and commissioned by Grant Thornton, which ranks the development of the business growth environments of 60 of the world’s largest economies over the past 12 months.

This article appeared in Business Standard on 17th September, 2015.