States to face greater scrutiny in business reform ranking next year

State governments are set to face greater competition and scrutiny in next year’s ease of doing business ranking by the Department of Industrial Policy and Promotion (DIPP).

Under the Business Reform Action Plan 2016 for state and Union territories, DIPP will launch an interactive dashboard on its website in December where state rankings will be reflected in a dynamic manner, depending on the reforms implemented by states. The site will track 340 parameters issued by the industry department.

“We will (for starters) release the name of states in alphabetical order on the dashboard. Suppose Telangana becomes the first state to conduct a reform out of the 340 and it updates it on the dashboard, then its rank will go to the top after we approve it. If another state implements three reforms, it will replace Telangana at the top in the list,” a government official involved in the project said, speaking on condition of anonymity.

The dashboard will not be visible to the public as only states and the DIPP will have the password to the dashboard.

The official added that every month the site will be accessible to companies for a week so that they can check the claims being made by the states and provide their feedback. Mint couldn’t establish how this would be done or how the companies will be chosen.

In this year’s ranking of states implementing business reforms by DIPP which was assisted by the World Bank, Prime Minister Narendra Modi’s home state, Gujarat, topped the ranking, followed by Andhra Pradesh, Jharkhand, Chhattisgarh and Madhya Pradesh.

The DIPP listed eight areas in which the states were ranked on 98 paramenters: setting up a business, allotment of land and obtaining construction permits, complying with environmental procedures, complying with labour regulations, obtaining infrastructure-related utilities, registering and complying with tax procedures, carrying out inspections, and enforcing contracts.

Most of the 340-odd parameters suggested to the states involve areas such as online single-window system, availability of land, its allotment, property registration enablers, construction permit enablers, environment registration enablers, labour regulation enablers, online tax return filing, inspection reform enablers and commercial dispute resolution enablers.

“Last year we ranked states on the basis of the reforms they carried out. This year we have made it a little more difficult by requiring them to give proof that industry is using the business reforms. After the states implement these 340 reforms, they will have to send us the names of 10 companies that have used each reform measure. We will then check with the companies whether they have actually used it,” the official said.

The whole process is expected to be completed by 30 June.

Arindam Guha, senior director at consultancy firm Deloitte Touche Tohmatsu India Pvt. Ltd, said the DIPP needs to strengthen the process of verification to find out whether industries, especially the small and medium enterprises, are benefiting from these business reforms by states. “DIPP has to carry out surveys at individual states of not only large but small and medium industries to know the ground reality. Such companies may not be tech-savvy to provide their feedback online,” he added.

Attempts to lighten the regulatory burden on business at the state level are an important component of Modi’s flagship programmes Make in India and Ease of Doing Business in India. The government’s aim is to improve the overall business environment in the country to improve its abysmally low doing business ranking by creating a competitive atmosphere among states. The move is also expected to encourage states to carry out reforms in areas such as land acquisition and labour laws, where the Modi-led Union government has found it difficult to make legislative headway.

This year, India’s doing business ranking published by the World Bank went up by four positions to 130 under a revised methodology.