Home / Industry / Ease of doing business ranking out on 31 August

In an attempt to encourage competition among states to formulate easier business rules, the department of industrial policy and promotion (DIPP) is gearing up to release the ease of doing business ranking of states on 31 August.

DIPP on 8 June released a framework to assess and rank states in terms of ease of doing business.

Its key objectives include assessing the implementation of various factors enabling the ease of doing business in a state and carrying out a comparative study of various states on the status of implementation.

“We have sent queries to state governments seeking clarification where their response and our field surveys do not match. We hope to release the report on 31 August," a DIPP official said, speaking on condition of anonymity.

DIPP has finalized eight areas in which states will be ranked: setting up a business, allotment of land and obtaining construction permit, complying with environmental procedures, complying with labour regulations, obtaining infrastructure-related utilities, registering and complying with tax procedures, carrying out inspections and enforcing contracts.

The move is also likely to encourage states to carry out reforms such as in land acquisition and labour laws, which the centre is finding it difficult to push through due to lack of enough strength in the upper house of Parliament.

Finance minister Arun Jaitley last month said that the states that wanted speedy development could take the lead in framing such laws, with the centre’s backing.

“If the centre fails to approve this (land acquisition bill) with consensus, then it should be left to the states. Those states which want to develop fast can suggest their own state legislation and the centre (would) approve that state legislation. An overwhelming section gave this kind of suggestion," he said, after a NITI Aayog meeting.

DIPP has received responses from all the state governments and a study is currently on to evaluate and rank the business-friendliness of the states, DIPP secretary Amitabh Kant said in Kolkata last month. The ranking would be an annual exercise, he added.

Ajai Dua, former DIPP secretary, however, said the release of the state rankings could have repercussions.

“States who don’t have a historical industrial culture, the ranking could evoke strong reaction from them.

A survey on the extent of improvement or the delta factor to measure incremental progress rather than mere ranking would have made more sense," he said.

A DIPP-sponsored survey named Best Practices to Improve the Business Environment across India conducted by Accenture last year, the results of which were released ahead of the general election, became controversial as the survey seemed to suggest that Gujarat was performing better in many parameters of doing business. Anand Sharma, who was then commerce and industry minister, had to distance DIPP from the survey, claiming it was not a government-sponsored survey.

The six select best practices that resulted from the survey were the integrated and comprehensive system for managing indirect taxes in Karnataka, the Labour Management Solution in Maharashtra, the Single Window Clearance for Industries in Maharashtra, land-related interventions in Gujarat, the implementation of e-governance in pollution in Gujarat and the single window clearance mechanism in Rajasthan and Punjab.

India dropped two places to rank 142 among 189 nations in the World Bank’s Ease of Doing Business 2015 study. With the exception of two parameters (getting credit and protecting minority investors), India does not feature in the top 100 in the remaining parameters.

In “dealing with construction permits" and “enforcing contracts" parameters, India ranks among the bottom 10 economies.

India is still the lowest ranked country in South Asia, with Sri Lanka (99), Nepal (108), the Maldives (116), Bhutan (125), and Pakistan (128) ranked higher.

Singapore topped the list for a ninth straight year, followed by New Zealand and Hong Kong.

India’s performance in terms of the points scored has improved in six out of the 10 criteria; deteriorated on the ease of paying taxes criterion; and remained unchanged on three other parameters. The country’s overall score improved to 53.97 in 2015 from 52.78 a year ago, when it was ranked 140.

In terms of global ranking, India has improved its performance only in the new category of protecting minority investors. It has dropped in all other cases except for enforcing contracts, where its rank has remained the same.

“India’s overall ranking and the individual rankings in various parameters clearly show that India is in urgent need of reforms to unlock the huge economic potential of the nation.

However, the reforms need to be initiated at various levels across centre, state and local governments.

A coming together of bold and necessary reforms in various areas will herald an era of high value investments, infrastructure growth, job creation, skill development and economic prosperity," stated the assessment framework for the state-level reforms enabling ease of doing business released by DIPP.

Prime Minister Narendra Modi has set his government the challenging task of improving India’s rank to the top 50 by 2017 to attract investors.

Accordingly, the ruling National Democratic Alliance (NDA) has since launched a drive to improve the country’s business environment, unveiling several labour reforms, swifter approvals for businesses to boost manufacturing and job creation, and efforts to bring transparency and stability in tax rates.

The next World Bank Doing business report is scheduled to be released in October.

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