Improving India’s regulatory framework for business is a key prerequisite for increasing investment in India and thereby creating jobs. However, the country fares poorly in ensuring business facilitators: It ranks 142 among 189 nations, according to World Bank’s “Doing Business 2015”study. Keeping in view the imperative to improve its business –friendly stance, the Government of India has embarked on an ambitious agenda to improve India’s Doing Business rank to 50 by 2017; but, this effort will only address a small subset of the regulatory burden on investors. A majority of the regulatory burden imposed on business is due to the plethora of laws, rules, regulations and procedures enforced by the States.
With a view to improve investment environment in 32 states with a great diversity in facilitations in doing business, chief Secretaries of States participating in the “Make in India” workshop in December last year finalized a 98-point Action Plan on “Ease of Doing Business” and subsequently it was decided that an evaluation will be conducted to assess progress by states covering January-June 2015. The present report by World Bank assisted by DIPP, government of India, captures the findings of the evaluation of this unique exercise, the first of its kind in the country and ranks States in terms of their implementation of the 98-point action plan.
The 98 points covered in the action plan are divided into eight following areas. The report assesses implementation status of reform measures across these areas.
- Setting up business: This covers availability of information on relevant information and establishment of an effective single window system.
- Allotment of Land and Obtaining Construction Permits: This covers land allotment, construction permits, property registration and other policy enablers. Each of these requires several other requisite approvals. Thus, Construction permit would entail approval of building plan, NOC from traffic& coordination department. NOC for felling trees,
- Complying with environment procedures: This requires clearances under water and air (prevention and control of pollution) Acts, hazardous waste and municipal solid waste rules, etc
- Complying with labour regulations: This requires compliance with Factories Act; Contract Labour Act, s; Shops & Establishment as also specific renewals under various legislations
- Obtaining infrastructure related utilities which include electricity connection, NOC from sewerage department, fire department, etc.
- Registering and complying with tax procedures: This includes registration under VAT, profession tax, entry tax, central sales tax, luxury tax etc. Tax
- Carrying out inspections: This includes inspections under legislation like for VAT, equal remuneration, factories act, minimum wages, payment of bonus, gratuity, shop & establishment, contract labour, water & air pollution, etc.
- Enforcing contracts, which includes establishing electronic courts
In terms of meeting the criteria of 98 points program on ease of doing business, Gujarat ranks 1st among the states, followed closely Andhra Pradesh. At aggregate level, the study classifies states in to following groups in terms of progress achieved in this action plan, It has also laid down for individual states initiatives already implemented along with future areas of improvement.
- Leaders: States with an overall implementation status of 75% and above. This assessment revealed that no States had attained this status.
- Aspiring Leaders: States with an overall implementation status between 50% and 75%. 7 States were found to be within this group: Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Madhya Pradesh, Odisha and Rajasthan.
- Acceleration Required: States with an overall implementation status between 25% and 50%. 9 States were found to be within this group: Delhi, Haryana, Karnataka, Maharashtra, Punjab, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal
- Jump Start Needed: States with an overall implementation status between 0% and 25%. 16
- States were found to be within this group: Andaman and Nicobar, Arunachal Pradesh, Assam, Bihar, Chandigarh, Goa, Himachal Pradesh, Jammu and Kashmir, Kerala, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura and Uttarakhand.
Generally, States have made good progress in terms of tax reforms. General tax reform includes mandating e-registration for VAT and CST; allowing online payment and returns filing of various State taxes; providing e-filing support through service centers and help lines; and risk-based tax compliance inspections. Construction Permits and land allotment procedures take up the fourth and fifth spots respectively.
Areas in which states need to reform include electronic courts, tree felling inspections, minimum wages, building plan inspections, land availability, etc.
No State has been able to demonstrate a fully comprehensive list of all licenses, NOCs and registrations required by a business to set up and operate, as a result of which no State allows entrepreneurs to filter the list by industry or number of employees to get a truly comprehensive sense of what his or her entire regulatory burden will entail. Similarly, no State has focused on integrating data at sub-registrar, municipality and land records offices comprehensively to provide a sense of conclusive title on each property. Mutation is also not integrated with registration in most States. On the inspections front, no State allows for all compliance inspections to be solely based on complaints with approval from the Head of Department. This implies that there is still a lot of scope for improvement in how inspections are administered in all States.
The study provides a good benchmark for initiating work towards enabling/ facilitating ease of doing business. Sustained and time bound efforts would need to be undertaken to make this a long-term success”. The study also provides platform for “competitive federalism” approach to business reform.
Data for the assessment was collected through a structured questionnaire that was completed by each State and UT Government. The responses were validated through a series of in-depth workshops with State Government representatives, and the collection of supporting evidence on each of the parameters of the questionnaire. The evidence collected consists 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.
The overall implementation status (which reflects the percentage of factors enabling ease of doing business, implemented in the State/UT) for the State was computed as: (Number of questions across all areas for which the response is “Yes”) / [(Total number of questions across all areas) – (Number of questions across all areas for which the response is “Not applicable”)] * 100%.