Andhra Pradesh and Telangana have jointly dislodged Gujarat to emerge as the best states to do business in the country, according to a report by the World Bank and DIPP.
Chhattisgarh, Madhya Pradesh and Haryana occupied the 4th, 5th and 6th slots in the index, based on implementation of DIPP's 340-point Business Reform Action Plan.
"States are really competing with each other. Healthy competition is happening among all the states. Everybody is monitoring everybody's performance," Commerce and Industry Minister Nirmala Sitharaman said while releasing the report.
She however said that more efforts are needed to encourage states like Jammu and Kashmir (at 31st) and other north-eastern regions to improve their business climate.
Nagaland, Manipur, Mizoram and Sikkim stand at 26th, 28th, 29th and 30th position.
"There is a long way to go," she said, adding that this time 15 states have implemented reforms suggested by the ministry as compared to seven last year.
Interestingly, eight out of top 10 states are ruled by BJP-led NDA. While Telengana is ruled by TRS, Uttarakhand has a Congress government.
The business reform action plan for states and UTs includes reforms on 58 regulatory processes, policies, practices, or procedures spread across 10 reform areas spanning the lifecycle of a typical business. These are mainly single window clearance, tax reforms, labour and environment reforms, dispute resolution and construction permit.
In 2015 Index, Gujarat featured at the top, with Andhra Pradesh grabbing the second position and Telangana 13th.
As per the latest 2016 index, those in the list of top 10 states in India providing a better climate for businesses include Jharkhand (7th), Rajasthan (8th), Uttarakhand (9th) and Maharashtra (10th).
Among other major states, Odisha occupied 11th slot, followed by Punjab, Karnataka, Uttar Pradesh, West Bengal and Bihar, Himachal Pradesh, Tamil Nadu and Delhi.
These rankings were provided in the report titled 'Assessment of State Implementation of Business Reforms 2016' which was prepared by World Bank in association with the Department of Industrial Policy and Promotion (DIPP).
The exercise is aimed at promoting competition among states with a view to improve business climate to attract domestic as well as foreign investments.
In the World Bank's latest 'Doing Business' report, India's place remained unchanged from last year's original ranking of 130 among the 190 economies.
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DIPP Secretary Ramesh Abhishek said for the next year's ranking, "we plan to have a round of consultations with states and other stakeholders".
There will be a workshop and stakeholder consultation during this month and then "we decide the action plan for next year's ranking", he added.
Asked whether the World Bank would consider modifications in its methodology to take into account the ground realities in large countries like India, the bank's Country Director for India Junaid Ahmad said: "Absolutely, we would like to see how our methodology can constantly being improved by the experience of different countries".
The commerce ministry said at least 32 state and UT governments submitted evidence of implementation of 7,124 reforms. India has 29 states and 7 UTs.
These submissions were reviewed by the World Bank team and validated by DIPP's team to study whether they met the objectives of the BRAP (Business Reform Action Plan).
A total of 6,069 reforms were approved as implemented or not applicable on the portal, it said.
"The results of the assessment demonstrate that states have increasingly risen to addressing the challenge of making it easier to do business.
"The national implementation average stands at 48.93 per cent, significantly higher than last year's national average of 32 per cent. This demonstrates the great progress made by states this year," it added.
Based on implementation of reforms, DIPP divided states into four categories - leaders (90-100 per cent) - 12 states; aspiring leaders (70-90 per cent) - 4 states; acceleration required (40-70 per cent) - 3 states; and jump start needed (0-40 per cent) - states like Kerala, Goa, Tripura, Diu, Assam, Puducherry, Nagaland, Manipur and Sikkim.
The leaders states include Andhra Pradesh, Telangana and Gujarat. The aspiring leaders are Karnataka, Uttar Pradesh, West Bengal and Bihar. States in the acceleration required category includes Himachal Pradesh, Tamil Nadu and Delhi.
Further it added that various states like Andhra Pradesh have created a dedicated body/bureau as a one-stop system for state level regulatory and fiscal incentive approvals.
On tax reforms parameter, it said states have made good progress in this.
About construction permits, it said states like Haryana have allowed applicants to apply online and upload building plans for automated construction permit approval.
"However, the present evaluation also highlights the need to properly communicate, monitor and evaluate these reforms to ensure that their impact is being felt on the ground," it added.
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Reacting to the ranking, a top Telangana official said the government is taking steps to make the country's youngest state numero uno destination for investments.
Telangana Principal Secretary (Industries) Arvind Kumar said the state, formed on June 2, 2014, has received about Rs 55,000-crore investments in the past one year.
"Our endeavour is to make the State No. 1 destination for investments. We are working in that direction. We have given investment approvals in 2,550 cases in a period of one year," Kumar told
