Andhra Pradesh topped a list of states in implementing reforms under the Centre’s ease of doing business initiative for a second straight year, according to the ranks based on Business Reforms Action Plan 2017 released on Tuesday by the World Bank and the department of industrial policy and promotion (DIPP). Delhi — the more important of the two destinations (the other being Mumbai) in the World Bank’s surveys for ranking India among other countries in ease of doing business — scored a meagre 31.60% in the latest ranking and is placed at 23rd among 34 states and Union territories. Its rank also worsened from 18th in 2016.
This stokes concern because India’s relatively low rank in the World Bank’s ease of doing business index (despite a record jump of 30 notches last year to 100th position for the first time) has been partly due to the multilateral body’s choice of Delhi as its most important survey destination for the country, with a 53% weight in its index. With further slippage in its domestic ranking, the likelihood of India moving up on the World Bank’s radar would appear dented. Of course, the bank will use several other yardsticks like the goods and services tax (GST) for this year’s ease of doing business ranking and the aggregate effect of those on India remains to be seen.
For the first time, stakeholders’ comments on a fifth of reform measures were sought by the World Bank for working out the state ranks, along with the usual practice of evaluating reforms claimed by each state. The ranking is based on 372 reform measures suggested jointly by the states and the DIPP in the year through June 2017, against 340 a year earlier. DIPP secretary Ramesh Abhishek said from next year, ranks will be based mostly on stakeholders’ perception of reforms and states’ claim could carry little weight. This is in sync with a similar practice adopted by the World Bank when it ranks countries on ease of doing business.
Interestingly, Karnataka — which has occupied the eighth spot, against 13th in 2016 — has received the maximum investment proposals. According to DIPP data, Karnataka has received almost 40% of the country’s total investment proposal value of Rs 1.9 lakh crore between January and May this year, up from its 39% share in the entire 2016 calendar year. By contrast, Haryana, which improved its ranking in ease of doing business from 14th in 2016 to third now, barely attracted any investments (just 0.2% of India’s total investment proposal value between January and May).
This is because the ranking in ease of doing business is an assessment of how the states fare in implementing an action plan adopted by them with the help of the Centre within a particular time-frame. It doesn’t, however, accurately reflect the level of business-conducive nature of the states, based on historical progress or backwardness on this parameter. Nevertheless, it reflects the willingness of states to improve their business climate to attract investors.
Notably, just like in 2016, four of the seven states with the lowest income levels in India have grabbed a place in the top ten, while all seven of them showed a reform implementation rate of over 80% this time, against 75% in 2016. The low-income states that have scored well are: Jharkhand (at number 4 with 97.99% score), Chhattisgrah (sixth spot with 97.36% score), Madhya Pradesh (seventh with 97.31% score), Rajasthan (95.68% and 10th rank), Uttar Pradesh (92.87% and 12th), Odisha (92.09% and 14th) and Bihar (81.91% and 18th).
This time, the 372 reform issues covered areas such as construction permit, environmental registration, labour regulations, obtaining electricity connection, online tax-returns filing, inspection reforms, access to information and transparency, single-window facilities, land availability and commercial dispute resolution. The ranking of states this time has been done solely by the World Bank, and DIPP assumed the role of a facilitator between the bank and states.