The business leaders, who met Prime Minister Narendra Modi last week,
would have been well served had the report entitled “Assessment of State
Implementation of Business Reforms” been released ahead of the meeting.
This exercise, conducted by the Department for Industrial Promotion and
Policy in collaboration with multilateral agencies, revealed in stark
terms the distance India’s states have to travel to create
business-friendly environments. The Centre deserves credit for
conceiving an exercise that highlights the gravity of the problem. That
India is a tough place to do business is no secret; it ranks 142 out of
189 in the World Bank’s Doing Business report of 2015. The Prime
Minister wants to place India within the top 50, and he has leveraged
his chief ministerial experience to convey the message that the
solutions for achieving this do not lie on Raisina Hill alone – the
states have to pull their weight. In a system as argumentative as
India’s it is to his administration’s credit that it managed to get the
states to agree on an exhaustive 98-point action plan last December to
improve the regulatory framework for doing business nationwide. India’s
disparate federation must become a united stakeholder in economic
reform.
It is noteworthy that National Democratic Alliance-ruled
or -allied states topped the overall results. But more pertinent is
that in terms of implementation of the 98-point action plan, no state
made it above 75 per cent, to qualify as a leader, and only seven states
made it to the “aspiring leader” category with scores between 50 and 75
per cent. The worrying factor is the 16 states that were grouped under
“Jump Start Needed” (no surprise, they cover Jammu & Kashmir and the
north-east). Worse, of the eight parameters, the highest score in three
is below 75 per cent. And in enforcing contracts, one of the key
concerns of any investor, the highest score is 55 per cent. The granular
nature of the action plan, grouped under eight broad parameters,
reveals the serious and basic nature of these gaps – more so since they
allow for none of the old alibis regarding step-motherly treatment from
the Centre. For instance, it is striking that no state has a full list
of all the licences, no-objection certificates and registrations
required by a business to set up and operate. Indeed, even states with
high growth rates, such as Maharashtra, cannot claim to offer great
business environments – Gujarat, for instance, scores just 33.3 per cent
in enforcing contracts, on par with Chhattisgarh.
The report is
right to acknowledge it does not take user opinion into account. Much
of the data underlying the indices are shallow, in the sense that
several of them focus on indicators that are not sufficiently
representative of the real problems hampering business. There is no
replacement, thus, for a comprehensive survey of the actual impediments
to business, and not just those reported by state governments. Including
some information on human development indicators – education,
availability of good schools and hospitals and so on – would have also
served as practical information for investors. Overall, however, it
represents a sensible beginning on the implementation of reform and
cooperative federalism.
(Source: Editorial in the Business Standard dated 16-09-2015.)
