Salient Point from the World Bank-KPMG Report on “Ease of Doing Business”


All states heads must pay attention to this especially the non performing ones.

Aiming to enhance the country’s image as a friendly investment destination, the government along with World Bank has released a state-wise report on the ease of doing business – a report in which Gujarat has topped with a score of 71.14%.

This report is quite important as it will provide all the state with a unbiased status report and future guidelines as to improvement. It clearly tells the area of deficiencies and hence scope for improvement. States which are doing good in certain areas can certainly do better in others. For example Punjab which has excellent scores in some areas still lag behind in many others.

The ranking of 32 states and union territories was based on eight specified parameters which include setting up of business, allotment of land, labour reforms and procedure for environmental clearance. SOME OF THE SALIENT POINTS ARE GIVEN BELOW.

1. Most of the the north-east states figure at the bottom 10 with Arunachal Pradesh faring the worst with a score of just 1.23 percent. Apart from Nagaland, Meghalaya, Mizoram, Sikkim, Tripura and Assam, the other states in the bottom 10 are J&K, Andaman and Nicobar Islands, Chandigarh and Uttarakhand.

2. In the area of setting up a business, Punjab has, surprisingly, trumped all the so-called business friendly states. It is to be noted that in the overall rank, the state is in the middle – at 16th spot. “Remarkably, Punjab is the only State in which the single window system allows application for all of the licenses studied in this assessment, although some others come very close.

3. Madhya Pradesh is the top scorer in allotting land and obtaining construction permit. The BJP government in the state had in April this year promulgated an ordinance amending the Land Ceiling Act, a law that governs the farm land, in order to ease land acquisition for private players. The national average in this area stands at 34.57%.

4. This one again springs a surprise: Gujarat scores 100 percent in comlying with environment procedures. Andhra Pradesh follows with an 85.19 percent score. Currently, only Gujarat, Rajasthan and Odisha allow auto renewal for both environmental consents on the basis of self – or third-party certification, and their consents to operate are valid for 5 or more years, the report noted. The national average is 31.61%.

5. Jharkhand, which has an overall 3rd rank, is 100 percent compliant with the labour regulations. The National average is 33.18%. “Jharkhand’s Labour Department is the only one in the country to score 100% on all four parameters studied in this assessment across all 7 processes. Andhra Pradesh also deserves a mention as the Labour Department provides clear information, timelines and online solutions, but lack downloadable and verifiable certificates,” the report has noted.

7. States were assessed on the implementation, over a six-month period from January to June, of a 98-point reforms agenda. This action plan on “Ease of Doing Business” was finalised by chief secretaries of states participating in the “Make in India” workshop inaugurated by the PM in December 2014.

8. This is the first ever ranking of States on the ease of doing business in India. The rankings reflect the ease of doing business in these States by the small and medium enterprises rather than foreign investors.

9. Obtaining infrastructure related utilities is the easiest in Maharashtra. The state scores a high 88.89 percent on this. Gujarat is the second with a 75 percent score. The national average is 32.01 percent.

10. Karnataka scores a high 97.73 percent on tax procudures front. The report terms the state’s registration processes groundbreaking. “On average, 10 States offer clear information on the tax registration procedures, 15 feature defined timelines, 9 have fully online registration systems, while 7 allow for downloadable certificates,” the report notes. The national average in this parameter is 48.61 percent.

11. Gujarat is the only clear winner on the two environmental inspections. The state has also scored positively on inspections under the Water Act, and the Air Act, the report has said. “The only other State that has implemented computerised risk assessment for environmental inspections is Maharashtra,” the report said. However, Jharkhand tops this area with a score of 72 percent, followed by Gujarat (71.74 percent). The national average is a lowly 19.45 percent.

12. The report notes that as many as 20 states have begun recruiting judges to fill the district courts. Only 8 have filled 80 percent of the vacancies in these courts. “Unfortunately, only 2 States – Delhi and Maharashtra – have introduced specialized commercial courts, and only Gujarat has made available model contract templates and guidelines on the department website,” the report notes. The top scorer in this area is Maharashtra – 55.56%. The national average is 16.49 percent.

OTHER IMPORTANT POINTS AND Performance of states:

BJP-governed States dominate the top ranks.
Gujarat implemented 71.14% of the reforms.
Andhra Pradesh has come second with a score of 70.12%, Jharkhand third at 63.09%, Chhattisgarh fourth with 62.45% and Madhya Pradesh fifth with 62%.
The largest recipients of foreign investments, Maharashtra and Tamil Nadu, are ranked eighth and twelfth with less than 50% scores.
Punjab emerged the best performer in the category ‘setting up a business’ and Maharashtra in ‘obtaining infrastructure-related utilities’.
Madhya Pradesh topped ‘allotment of land and obtaining construction permit’ and Karnataka ‘registering and complying with tax procedures’.
Gujarat was assessed as the best for ‘complying with environment procedures’. Jharkhand is the best in two categories: ‘carrying out inspections’ as well as ‘enforcing contracts’.
With this, it is expected that investments will begin to flow to States that make it easier to do business, seeing which the low-rank States could be encouraged to take up reforms.

COURTSEY: World bank reports.

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Asheesh Shah
Author: Asheesh Shah

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