States to get report card on business friendliness

It is not unusual to think that India is among the worst places to do business in the world, given the endless setbacks that many foreign investors have faced in the country. But the government is now getting serious about shaking off that dubious distinction. Soon it will adopt a "name-and-shame" approach towards states that fail to implement its directives on easing regulatory procedures.

To start with, it will issue report cards on the progress made by the states on their investment friendliness. The idea is to foster competition among the states and encourage them to set their house in order. The states will be judged on a set of parameters that are in line with the criteria used by the World Bank for its annual Ease of Doing Business report.

The report card, which will be issued annually, will see the states getting assessed on a 98-point matrix of nine broad parameters that includes time taken to obtain construction permit and start a business. The project, which is being spearheaded by the department of industrial policy and promotion (DIPP), will also see the states getting judged on their labour regulations, compliance with environment regulations, infrastructure utilities and tax procedures, among others.

DIPP Secretary Amitabh Kant, who is also Prime Minister Narendra Modi's pointman for the 'Make in India' campaign, has said the Centre will "name and shame" states that are lagging behind in creating an investment-friendly environment. The states that are being closely watched by the Centre include Gujarat, Maharashtra, Delhi, Tamil Nadu and Karnataka-states which are known to be more business friendly than the rest.

India's ranking in the World Bank's Ease of Doing Business report is a dismal 142 among 189 countries, even below many countries in Sub-Saharan Africa. Prime Minister Modi has set an ambitious target of being among the top 50 in the next couple of years and reach the top 30 in the next three years.

  The annual exercise to assess the states "is going to be a significant step in bringing the states into the Centre's decision-making process," says a top industrialist who does not want to be named. However, making the states agree to the Centre's directives in letter and spirit will be difficult. "There is a lot of difference between states agreeing to something on paper and implementing it at the ground level," the industrialist adds.

For now, the government is busy collecting data from the states before it assigns them a rank. States with an online system where an investor can key in specific details (such as type of industry, number of employees, location etc.) and obtain information regarding all state approvals applicable to his/her business are likely to fare better on the rankings. A centralised helpline number to facilitate queries regarding the application and approval process will also add to their overall points.

DIPP officials say the states are excited about the process and are showing considerable enthusiasm to participate in it. Whether or not the scores will encourage them to add to their attractiveness as an investment destination though remains to be seen.