Ease of doing business ranking: Narendra Modi govt firms up 295-pt reforms agenda for states

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The Centre has firmed up a 295-point reform agenda for states to boost their ranking in the ease of doing business this year, listing dramatic improvement in parametres—including starting a business, electricity connections and granting clearances across various sectors—as key targets, official sources said.

States have been given the target to facilitate the starting of a company in just six days, compared with an average of 26 days now, the sources told FE. Digitisation of various processes and faster clearances will be key in achieving this objective, they added. All the targets are set after extensive consultations with states.

The move is crucial, as India’s rank in “starting a business” in the World Bank’s ease of doing business index worsened four notches in the recently-released report from a year before to 155th among 190 nations. This was among the worst-performing segments last year, as the country’s ranking barely improved from the previous year to 130th.

The World Bank, however, surveys just two destinations (Delhi and Mumbai, and not all states) for ranking India among other nations in ease of doing business. Nevertheless, the target of six days to start a business has been given to all, including Maharashtra and Delhi, the sources said.

To further improve the performance on the electricity parametre, states have been asked to provide electricity connections within just seven days under normal circumstances (against around 15 days now) and in 15 days in right-of-way cases.

Also, the processes for providing such a connection be restricted to just 3 from roughly 5 now. “Getting electricity” was the star performer for a second straight year for India, as its position in this segment in the World Bank’s index improved 25 places to 26th in the latest report, saving the country from a slump in the overall ranking.

States were given a 340-point reform agenda last year and a 98-point one in the previous year when the ranking—a brain-child of the Department of Industrial Policy and Promotion (DIPP) to foster competition among states—was done for the first time.

This time around, most of the reform measures were kept unchanged from last year’s agenda (with renewed targets on them, though), considering the fact that they are still very much relevant and there is a scope for further improvement by many states on them. However, there are some notable changes as well, said the sources.

According to the latest agenda, states have to expedite various licencing and compliance procedures relating to transportation, state excise, health, fertiliser and agriculture sectors to improve their ranking, the sources said.
Importantly, the ranking in ease of doing business is an assessment of how the states fare in implementing an action plan adopted by them with the help of the Centre within a particular time-frame. It doesn’t accurately reflect the overall level of the business-conducive nature of the states.

The DIPP initiative got huge response from states last year. Commerce and industry minister Nirmala Sitharaman earlier said while only seven states had implemented over 50% of the total reform points in 2015 and no state had crossed 75%, as many as 17 states exceeded the 50% mark, with 16 implementing over 75% of reforms in 2016.

Last year, Andhra Pradesh and Telangana jointly topped the list of states in implementing reforms under the Centre’s ease of doing business initiative. Interestingly, four of the seven states with the lowest income levels grabbed a place in the top ten last year, while all seven of them—Chhattisgarh, Madhya Pradesh, Jharkhand, Rajasthan, Odisha, Uttar Pradesh and Bihar—showed an reform implementation rate of over 75%.