Red-tape and Poverty

World Bank’s report shows richer countries have less red-tape

The World Bank has released an excellent report on Doing Business in 2005, comparing costs of doing business in various countries. The upshot of this study is that countries are unable to extricate themselves from poverty because red-tape keeps getting in the way.

Relief from poverty does not come from a few crumbs tossed from rich tables; it arises from domestic economic growth. It is difficult to force people to be entrepreneurial, but they can be encouraged to be so if it is both easy and rewarding. The burdens and the fees should be lower, not higher, in the poorer countries because they need the growth more.[Adam Smith Institute’s weblog]

While India did better than the previous year, and does well in protecting investors, it still has a long way to go – for example when businesses are closed, claimants recover just over 12 cents to every dollar, after a long wait of 10 years. Their counterparts in OECD countries can recover as many as 77 cents in less than two years; and 35 cents in two-and-a-half years in China.

3 thoughts on “Red-tape and Poverty”

  1. Pingback: Economy Matters
  2. Nicely put.
    But socialist slogans (which our hypocritical marxists no longer advocate in Calcutta, but only in delhi) remain the single biggest source of opposition (apart from bureaucratic inertia and special iinterest lobbying) to any meaningful reform on the red-tape front.

    I was in hyderabad fopr 2 yrs from 2002 and Naidu’s regime actually made it easier for citizens to pay local taxes and utility bills by opening these e-seva centres. Result? Collections and compliance jumped. Everybody was happy in the end. Naidu’s famous rivalry with SM Krishna in neighbouring K’taka was one big driver of rapid change ion the ground. Bottomline: competition works wonders.

    Now, now, if only UP and Bihar could compete in something other than casteist and crime statistics….

  3. The inverse relationship between red tape and investment is known however the requsite remedy of cutting the redtape is something which requires efforts on part of the red tape itself!!
    Jairam ramesh used to personally escort files to ensure they did not get entangled in red tape, we need more of the same attitude.

Comments are closed.