India ranked 8th among most startup-friendly country in Asia, behind China - based on 18 economic indicators according to consumer research group ValuePenguin’s latest study. Singapore, who is rated by the World Bank as the second best country in the world to conduct business, has roped number one position followed by Hong Kong and Japan both at No.2. India is behind not only to China but Malaysia too, whose total GDP is far less than that of India.

The study evaluated available economic data to determine the best countries in Asia-Pacific for startups. The analysis of the study covered the general economic health, cost of doing business, business environment and labor force quality in Asia's 12 leading nations.

Below are the top 12 countries in Asia-Pacific for startup businesses. Every startup has different circumstances and preferences, so the data is expanded to show the top countries by each category. Lower scores indicate better ranks.

RankCountryComposite ScoreEconomic HealthCost of Doing BusinessBusiness ClimateLabor Force Quality
2Hong Kong4.
6South Korea6.

Why Didn’t India Rank Higher?

While a report last year revealed that India houses 4,750 tech startups — the highest number in the world after the United States and Britain. However, India's economy is growing quickly (7.2% GDP growth in 2017), and the government offers qualifying startups receive a three-year tax holiday. Yet, India’s score is driven down by the fact that it is still the poorest country in this study (2017 GDP per capita: $1,710 ) with a high unemployment rate, and low education attainment rates (only 37.5% of adults have secondary education).

India ranked low also due to low education rates, internet access and per capita GDP. Policies that address education and internet access will help attract startups. Over time, we expect that the high GDP growth rates will result in greater levels of per capita GDP.

Why Does China Rank Ahead of India?

Although, in a BRICS report, India surpassed China in terms of Innovation growth but its a matter of fact that China is the second largest economy in the world, and its economic indicators are very strong. The government also offers a lower tax rates for SMEs (10% or 20%) making

To recall, in June last year, Indian government and Nasscom have entered into an MoU with China’s Guizhou, a mountainous province located in southwest of the country to encourage Indian entrepreneurs to come set up their businesses there.

What India Could Do To Improve Its Ranking

As far as India's startup policy and tax regimes is concerned, low cost of doing business in India is quite impressive that's why the country ranked second for this category. The 3-year tax holiday in India for qualified startups is a great incentive. However, after the tax holiday, the corporate tax rate is quite high (30%, 25% for SMEs though it sounds like this rate may not last), so a lower corporate tax rates might encourage forward thinking startups to move to India.

Speaking about Singapore, as top startup-friendly country in Asia, tax incentives for small businesses, highest education rates (42% of working adults have post-secondary educations) in Asia and highly regarded public institutions are few factors that make this country a great place for startups to grow their businesses. No wander, a lot of Indian startups has registered themselves in Singapore instead of choosing the home country. E-commerce major Flipkart was among the first to move to Singapore followed by InMobi, Mobikon, Freshdesk, Druva, AdNear and Grofers, among others.

The available data indicate that Indian startups might prefer to incorporate in Singapore because of the ease of starting a business there. In Singapore, the registration process takes 2.5 days, 3 procedures and costs 0.5% of income per capita. In India, the process takes longer (30 days and 11 procedures) and costs more (15% of income per capita), making it much more burdensome. (source: World Bank).

Corporate tax rates are a crucial factor for all businesses. While Singapore is an expensive country to run a business, it offers tax incentives for startups. Exemptions for startups include 75% of the first S$100,000 earned and 50% of the next S$100,000. This exemption makes Singapore significantly less expensive for startups.

Moreover, access to a high quality workforce is essential for startups that wish to innovate and grow. While this can be a subjective metric, education rates can provide a proxy for the strength of a workforce. The study considered secondary and tertiary education attainment rates. Singapore, Korea and Japan are have very well-educated adult populations, which bodes well for startups hiring in these countries.

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