The report on an assessment of the implementation of business reforms by various states—brought out by DIPP along with World Bank, CII and KPMG—is interesting as it is probably the first of its kind. While analysing the extent to which states have achieved success when targeting 98 action plans, we get a fair idea of how states stand on a common scale. This is a starting point and, going forward, if this exercise is done on an annual basis, we will get a clear idea of the progress made intertemporally. Given the stark differences across states, there would be an incentive for those lower down the echelon to improve on the pace of business reforms, enabling faster growth.

India’s overall rank of doing business is low, at 142, in a list of 189 countries, and in only two parameters—on credit access and investor protection—we come in the first 100. The implication here is that we do well when it comes to regulation—where credit goes to RBI and Sebi—but falter when it comes to processes where there is human interface. Besides, most laws that have to be adhered to are localised and fall under the domain of the state or the specific town or city where activity is undertaken. Hence, a state analysis is more compelling to pinpoint the areas that need improvement, as often these stress areas are not under the purview of the Centre.

Karnataka govt says the ranking does not seem to have considered several steps taken to improve ease of doing business across sectors

Bengaluru: The ease of doing business rankings survey has led to unease in yet another state capital.

Karnataka government officials on Wednesday said the state will ask the central government to reassess its ranking at the ninth position.

Prime Minister Narendra Modi’s home state Gujarat topped an official ranking of states measuring their success in rolling out regulatory reforms to facilitate the ease of doing business.

Maharashtra, which appeared at the eighth position, is planning a similar request for reassessment, Business Standard reported on Wednesday. While Maharashtra is ruled by Bharatiya Janata Party (BJP) and Shiv Sena—who also share power at the Centre—Karnataka is ruled by the Congress party.

The survey was sponsored by the department of industrial policy and promotion (DIPP), and conducted in association with World Bank and consulting firm KPMG.

R.V. Deshpande, Karnataka minister for large and medium industries and tourism, said the ranking does not seem to have considered several steps taken to improve ease of doing business across sectors; otherwise, he said, Karnataka would have been among the top states.

The most important takeaway from a World Bank supported estimate of the ease of doing business in 32 of India’s states and union territories is that state governments are interested in economic reforms. Union minister Prakash Javadekar is also on the right track when he argues that making it easier to do business will bring more poor people out of poverty. This goes against the grain, refreshingly, of the usual rhetoric proffered by most political parties – whose essence is captured in Rahul Gandhi’s charge of ‘suit boot ki sarkar’ – that facilitating business is tantamount to expropriating the poor and putting them out on a limb.

China’s stratospheric rates of growth were underwritten by competition among its provinces. That’s sadly lacking in India as states ask for ‘packages’ instead. But when it comes to nuts and bolts of economic systems, there is consensus as well as desire to improve among states. Consequently, in December they agreed on a 98-point action plan to enhance transparency and improve efficiency of government regulatory functions. In addition, they are willing to be measured on progress of implementation. That’s the right step forward.

We commend the states that have shown greater determination in undertaking the 98 reform measures intended to improve ease of doing business (EDB). But we recommend curbing any temptation to go gaga over the results of the survey done by the World Bank’s India office in this regard. The simple fact is that not one state has acomplete checklist of all the permits, registrations and no-objection certificates to be obtained by a would-be entrepreneur. In no state is the system of land records efficient and guaranteed to vest title with unquestioned ownership. Courts remain dysfunctional. In order to achieve the commendable goal set by Prime Minister Narendra Modi to improve India’s position in the World Bank’s global EDB rankings, much more must be done.

The Maharashtra government says it disagrees with the World Bank report ranking the state at eighth place in the ‘ease of doing business’ index.

It proposes to request the Centre to recommend a re-assessment to the Bank.

State industries minister Subhash Desai told Business Standard: “The observations are based on old information. (This) government has taken a number of reforms, including amendments to the Factories Act, reduction in the number of approvals from 76 to 37, doing away with inspector raj and relaxation in River Regulatory Zone Regulations.”

The government, he added, had issued about 40 circulars to reduce red tape for investors. Maharashtra has attracted ‘investment intention’ of over Rs 60,000 crore since October 31 when the Bharatiya Janata Party-Shiv Sena government took over, he said.

“After the Bank takes into account the recent initiatives, Maharashtra will be ranked third,” he added. “Some more reforms are in the pipeline, which, once implemented, will see Maharashtra ranked at first position next year.”

The government has stoked the competitive spirit among states by getting them ranked—by the World Bank—across eight broad parameters over the first six months of 2015 in implementing a 98-point plan on the Ease of Doing Business. This is a big first step for a country that, while being ranked a lowly 142 among 189 nations, is planning to make it to the top 50. Five of the top six states identified by the World Bank in terms of improved performance—Gujarat, Jharkhand, Chhattisgarh, Madhya Pradesh and Rajasthan—are all ruled by the BJP; Andhra Pradesh, ranked second, is ruled by the TDP, a BJP ally. While Gujarat leads with an implementation status of 71.14%, it cannot yet be classified as a Leader (implementation level of 75% or more) state.

What is the kind of effort that went into creating this report?

We had the both global and local team working on this. I had probably the easier job of analyzing the data, the effort is actually by DIPP (Department of Industrial Policy and Promotion) and KPMG.

They have been working at it for a while. We started working on it since the data came in. We were summarily providing comments at the very beginning of the exercise but the real work started once KPMG had the cleaned data set.

Having studied business reforms being undertaken at state level, how do you see the situation?

From India's perspective, what's going for you is the energy that the government has.

The energy in the room around reforms is very impressive, both at the states and Centre. They want to reform, improve. There is a desire to change.

India is grappling with several issues as the report points out. What should be India's main concern right now?

Going forward, the challenge is to sustain that momentum and energy. We need to deliver some of the more difficult reforms. And, not difficult in terms of the effort but in terms of time taken. For instance,enforcing contracts, setting up of electronic courts, implement systems and processes will take time.

Now that we know that Gujarat, Andhra Pradesh and Jharkhand are the leaders, other states that have been a magnet for business all along will hopefully work to get their act in place soon.

The recent ranking of states based on implementing a 98-point plan on the Ease of Doing Business is a step in the right direction. Now that we know that Gujarat, Andhra Pradesh and Jharkhand are the leaders, other states that have been a magnet for business all along will hopefully work to get their act in place soon. Tamil Nadu that has attracted some of the biggest global businesses is ranked below both West Bengal and Uttar Pradesh, while Maharashtra is behind Odisha and Rajasthan. Similarly, while Andhra Pradesh is ranked second, it’s twin Telanagana is way down at 13. What that means is that these states will now have to work on the eight parameters―setting up a business, land allotment, environment procedures, labour regulations, obtaining infrastructure related utilities, tax procedures, carrying out inspections and enforcing contracts―that have been identified.