The latest report of India’s internal ease of doing business ranking, conducted by the department of industrial policy and promotion (DIPP), could not have come at a better time. Just last week, the World Bank had placed India at 130th rank (out of 190 countries) in its Doing Business report — the country climbed just one notch, much to the disappointment of the central government. But the state-wise ranking, titled Business Reform Action Plan that is modelled on international ranking systems, shows several states have registered a remarkable success between July 2015 and June 2016 and moved swiftly to showcase themselves as ideal investment destinations. In the last report, released in September 2015, not a single state had implemented more than 75 per cent of the reform agenda. This year, 16 states have crossed that threshold.
What is interesting is the churn in the names of the states that have done well. Within just one year, many states have responded well on key reform areas: Single-window systems, tax reforms, construction permits, environment and labour reforms, inspection reforms, and commercial disputes and paper-less courts. Many states have also created a dedicated body as a one-stop system for state-level regulatory and fiscal incentives and made good progress in tax reforms. Uttarakhand has jumped from 23rd to the ninth spot while Haryana has moved up from 14th to sixth. But none could match the spectacular rise of Telangana, which went all the way to the top from 13th spot in 2015 and, in doing so, displaced last year’s topper Gujarat. But there were losers too. Chief among them were Odisha, which slipped from seventh to 11th place, and Jharkhand, which slid to seventh from third rank last year. The most significant fall was that of Tamil Nadu from 12th spot last year to 18th this year. The worrisome aspect, however, was the continued uninspiring performance of some of the most populous states such as Bihar, Uttar Pradesh and Maharashtra. For instance, Bihar does not figure among the top five in any of the 10 reform areas, comprising 340 action areas, that were tracked by the DIPP.
There are two key takeaways from these results. One, they lend credence to the central government’s grouse that the World Bank’s rankings are underestimating the ground-level improvement that is taking place in the country. Delhi and Mumbai, the two cities mapped by the World Bank and used as proxies for India, had little to write home about. Delhi, in particular, was ranked a lowly 19th in the inter-state rankings while Mumbai (as part of Maharashtra) barely made it to the 10th place. And two, clearly, the rate of improvement is faster in some of the other states such as the resource-rich Chhattisgarh, which was ranked fourth this year. Last year’s rankings have clearly prompted quite a few states to bring in key reforms in order to play catch-up. This is exactly what Prime Minister Narendra Modi alluded to when he said he wanted to push for “competitive cooperative federalism”, wherein states vie to improve their performance to come up to the level of those with better rankings. It would be a good idea to set up a forum where it may be possible for the laggard states to learn from the successful ones.