Indonesia v. India

In a recent World Bank ranking of how investor friendly a country is Indonesia ranked 135th of 175 countries surveyed. Ironically India ranked 134th only one notch better. India has been growing 8% and Indonesia has been growing 4%. To Indonesia’s credit the time it takes to start a business has dropped from 151 days to 97 days. But this wasn’t enough to move Indonesia up from last year’s rating. The reason is other countries have been improving faster. With India’s ranking one would think that its growth rate would parallel that of Indonesia. Recently on NPR I listened to a group of Indian business leaders try to define the reasons that India has done so well. They couldn’t come to a consensus. It could be that India was just further down the economic rung, the GDP per capita of India is $714 as opposed to $1259 in Indonesia, so it is easier for them to move up. One of the starkest differences is that Indonesian interest rates are over 12% and India’s are 6%. Could it be as simple as the collective knowledge of investors has placed the risks of doing business in India as a lot smaller than that of Indonesia?