A report titled "Assessment of State Implementation of Business Reforms" was released today.
This report captures the findings of an assessment of reform implementation by states, conducted jointly by the Department of Industrial Policy and Promotion (DIPP), the World Bank Group and KPMG as the knowledge partner, the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII).
This assessment, the first of its kind, has been conducted to take stock of reforms implemented by states in the period January 1 to June 30, 2015 based on the 98-point action plan for business reforms agreed between DIPP and state and Union territory governments on December 29, 2014.
"This is indeed a unique initiative and is very much in line with the Prime Minister's agenda for 'Minimum Government and Maximum Governance'. I am sure the report would provide a clear direction for future reforms for the States. FICCI would assist States in implementing the action areas as highlighted by the report and would work along with them to implement the agenda of simplifying the regulatory environment for manufacturing and business in the country" said Dr. Jyotsna Suri, President, FICCI.
According to the assessment, Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Madhya Pradesh, Odisha and Rajasthan have implemented over 50 percent of the 98 point action plan business reforms studied in the assessment. Karnataka, Maharashtra and Uttar Pradesh are also among the top 10 states in the assessment. No state has implemented 75 percent or more of the proposed reforms.
"This report is very timely as most states are vying for attracting investments. The report is based on defined objectives, targets achieved and data professionally analyzed. It is based on a thorough and rigorous analysis of performance by states. This kind of assessment provides deep insights into regulatory practices across states, and brings forth details on how states are implementing reforms. Most states have expressed an interest to not only compete, but also to collaborate and learn from each other's experience. As a way forward, private sector should take forward the reform agenda as provided through this report with states," said Dr. Arbind Prasad, Director General, FICCI.
"This report is the result of joint efforts by central government, state governments, the private sector, consultants and international agencies. This is a unique work which will spur states to become champions of change," added Mr. Chandrajit Banerjee, Director General, CII.
The assessment recognizes the fact that most states have already embarked on ambitious reform programs or expanded their ongoing reform efforts since the announcement of the 98-point action plan. The assessment has identified good practices on different parameters. For example; Punjab leads in the area of "Setting up a Business", as it features an online single window system for registrations and licenses that cover most of the regulatory services in the country. Andhra Pradesh and Chhattisgarh have also made significant progress in this area. Maharashtra, followed by Gujarat and Madhya Pradesh, were ranked highest in "Obtaining Infrastructure Related Utilities," with clearly defined timelines for electricity, water and sewage connections, and a reformed electricity connection application process. Similarly, Karnataka received the highest score on "Registering and Complying with Tax Procedures," due to its comprehensive automation and process reengineering efforts. Jharkhand leads the country in "Carrying out Inspections," since its labor management system implementation has also focused on inspections reform.
Across the country, states have made good progress in general tax reforms like mandating e-registration for VAT and CST; allowing online payment and filing of returns for various state taxes; providing e-filing support through service centers and helplines; and risk-based tax compliance inspections. Twenty nine states allow VAT to be paid online, and 28 states allow CST to be paid online. While most states allow e-filing of VAT and CST, 21 states have established helplines for users. Twenty five states have defined timelines for VAT registration, and 21 have defined timelines for CST registration.
However, the report also flags a multitude of reforms that still need to be implemented effectively by most states. A majority of states are yet to begin implementing electronic courts to resolve commercial disputes, i.e. infrastructure to allow for e-filing of disputes, issuance of e-summons, online payments, e-cause lists and digitally signed court orders. Twenty six states are yet to introduce reforms along a wide range of labor inspections under various acts, or on inspections related to building permits. About 25 states lack online availability of information on land banks, and use of GIS systems to track industrial land parcels.
The report also highlights the need to properly communicate, monitor and evaluate these reforms, to ensure that their impact is being felt on the ground.
"What this report does very well is to provide a roadmap for states serious about improving their business environment and creating jobs. This has an inclusive objective as it is the small and medium enterprises which will gain the most from these reforms," said Mr. Onno Ruhl, World Bank Country Director in India.
"The World Bank stands ready to assist state governments in this important agenda," he added.
Data for the assessment was collected through a structured questionnaire that was sent to each state and union territory government. The responses were validated through a series of in-depth workshops with state government representatives. Supporting evidence on each of the parameters of the questionnaire was also collected. The evidence collected consisted of rules, notifications, circulars, website screenshots and a variety of other documents provided by the state government or found online to prove conclusively that the state meets the requirements of the assessment. Following the completion of the data collection and state visits, the data was evaluated in detail jointly to ensure that the same yardstick was applied to measure progress for all states.
