The business leaders, who met Prime Minister Narendra Modi last week, would have been well served had the report entitled "Assessment of State Implementation of Business Reforms" been released ahead of the meeting. This exercise, conducted by the Department for Industrial Promotion and Policy in collaboration with multilateral agencies, revealed in stark terms the distance India's states have to travel to create business-friendly environments. The Centre deserves credit for conceiving an exercise that highlights the gravity of the problem. That India is a tough place to do business is no secret; it ranks 142 out of 189 in the World Bank's Doing Business report of 2015. The Prime Minister wants to place India within the top 50, and he has leveraged his chief ministerial experience to convey the message that the solutions for achieving this do not lie on Raisina Hill alone - the states have to pull their weight. In a system as argumentative as India's it is to his administration's credit that it managed to get the states to agree on an exhaustive 98-point action plan last December to improve the regulatory framework for doing business nationwide. India's disparate federation must become a united stakeholder in economic reform.
It is noteworthy that National Democratic Alliance-ruled or -allied states topped the overall results. But more pertinent is that in terms of implementation of the 98-point action plan, no state made it above 75 per cent, to qualify as a leader, and only seven states made it to the "aspiring leader" category with scores between 50 and 75 per cent. The worrying factor is the 16 states that were grouped under "Jump Start Needed" (no surprise, they cover Jammu & Kashmir and the north-east). Worse, of the eight parameters, the highest score in three is below 75 per cent. And in enforcing contracts, one of the key concerns of any investor, the highest score is 55 per cent. The granular nature of the action plan, grouped under eight broad parameters, reveals the serious and basic nature of these gaps - more so since they allow for none of the old alibis regarding step-motherly treatment from the Centre. For instance, it is striking that no state has a full list of all the licences, no-objection certificates and registrations required by a business to set up and operate. Indeed, even states with high growth rates, such as Maharashtra, cannot claim to offer great business environments - Gujarat, for instance, scores just 33.3 per cent in enforcing contracts, on a par with Chhattisgarh.
The report is right to acknowledge it does not take user opinion into account. Much of the data underlying the indices are shallow, in the sense that several of them focus on indicators that are not sufficiently representative of the real problems hampering business. There is no replacement, thus, for a comprehensive survey of the actual impediments to business, and not just those reported by state governments. Including some information on human development indicators - education, availability of good schools and hospitals and so on - would have also served as practical information for investors. Overall, however, it represents a sensible beginning on the implementation of reform and cooperative federalism.
