Andhra Pradesh may have topped the ranking of states in the government’s ease of doing business survey in 2017 for a second straight year, but the state ranked fourth in terms of actual investments. The Department of Industrial Policy & Promotion’s (DIPP) Secretariat of Industrial Assistance (SIA) statistics show that Industrial Entrepreneurs Memoranda (IEM) implemented in the state translated into Rs 4,509 crore, or 6.3% of the total Rs 71,396 investments for the country that year. In 2016, Andhra Pradesh had received Rs 11,395 crore, or 11.3% of the actual investments, ranking second in terms of actual investments.
Maharashtra topped the list in terms of investments both in 2016 and 2017. However, the state did not rank in the top 10 in the government’s ease of doing business in both the years. The state received Rs 40,588 crore, or 40.4% of the total actual investments of Rs 1,00,537 in 2016 and 26.6% last year, clearly indicating that rankings in the ease of doing business survey, notwithstanding, investors are going by their own perceptions and perhaps the history of the business ecosystem in a state.
Telangana, which was carved out of Andhra Pradesh in 2014, stood second in ease of doing business, losing out to Andhra Pradesh on the number one rank by a decimal point. The two Telugu-speaking states were tied at the top spot in 2016. However, in terms of actual investments received in 2017, the state is in the sixth slot after Maharashtra, Madhya Pradesh, Gujarat, Andhra Pradesh and Assam.
The ease of doing business ranking, which was introduced in 2015 with 285 action points, was expanded to 372 action points last year, including registering property, paying taxes and labour regulations. Of the 372 action points, 78 had feedback from the actual users or businesses. The newly introduced feedback system dragged down the performance of several states, including West Bengal, as their claims were not matched by feedback from users.
Haryana, which ranked third this year and sixth last year in ease of doing business, does not figure in the top 10 states in terms of actual investments. Madhya Pradesh, which ranked seventh this year, received 16.4% of the total investments, second to Maharashtra.
Overall, the IEM data show a decline in investment proposals. From Rs 5,67,868 crore in 2012, it dropped to Rs 4,14,086 crore in 2016 and Rs 3,95,546 crore in 2017. Of the proposed Rs 4,14,086 crore investment in 2016, projects worth Rs 1,00,537 were implemented, or 24.3% in 2016. Similarly, in 2017, of the Rs 3,95,296 crore worth of investment proposals, only Rs 71,396 crore, or 18% of the proposed amount, were implemented. This trend is reflected in the gross fixed capital formation, which has remained stagnant at 28.5% of GDP since 2015-16.