The role of the state governments in recognising as well as achieving their investment and business potential is increasingly acknowledged both at the federal and state levels of governance. At the same time, the idea that the implementation and management of such policies has to necessarily be initiated at the state-level, since they know their local needs better, has gained ground with the Business Reform Action Plan (BRAP) programme of the Department of Industrial Policy and Promotion (DIPP).
Under the BRAP programme, annual ranks are generated for each of the 36 states and Union Territories (UTs). The underlying philosophy of BRAP is to inculcate a spirit of competitiveness among states.
The ranks are based on the states’ reforms undertaken to simplify regulatory burden on the businesses and reworked every year. The state governments work to embrace reforms to simplify ways of doing business and expedite pending project clearances which help in attracting funds and investments for economic development.
The BRAP programme measures the involvement of the state in the process of reform implementation. The reform coverage has expanded over time to include more relevant reforms for business operations under 10 broad areas – setting up a business, allotment of land and obtaining construction permit, complying with environment procedures, complying with labour regulations, obtaining infrastructure related utilities, registering and complying with tax procedures, carrying out inspections, and enforcing contracts, access to information and transparency enablers and single window system.
The states are also required to provide evidence to support their claims on implementation of the reforms. The evidence comprises rules, notifications, circulars, screenshots of the websites or other relevant documents. The states have been assessed on 419 action points for reforms implemented in 2017.
States reforming in less than 80% of the action points are termed Aspirers, which look up to the Top Achievers having reformed more than 95% of the action points. Between the two extremes, are placed the Achiever and Mover states which have reformed 90-95% and 80-90%, respectively.
The aspirer states include UTs and northeastern states having abundance of natural resources and land availability due to lesser population. Although services such as tourism or education can be a source of development for the North-East, the expansion of industries is imperative for capitalising on their natural resource strengths and check their underutilisation.
The relatively low performance of the Northeastern states — Manipur, Sikkim, Arunachal Pradesh and Meghalaya — has important repercussions for India’s Look East policy too since these states are our gateway to the East. While factors such as labour, materials, credit, transport system, marketing facilities, natural resource, technology, political stability, regional importance and complementarily of industries can be decisive
for industrial development, not all of these are equally important across regions and states.
For instance, the Northeastern states have a rich resource of
oil, coal, limestone, wood, rubber, forest-based products, agriculture and horticulture products for food processing, rubber, uranium, which can attract investors to set up units there.
Given the resource-rich nature of activities which depend on stringent environmental clearances, these states should work on simplifying the institutional mechanism. The strengthening of resource based activities will provide stimulus to other industrial activities.
This refers to their huge potential in hydro power, mineral extraction (oil, limestone), food processing, rubber plantations, tea industry and handicrafts. For instance, adequate power supply through hydro projects will facilitate setting up cement units which thrive on limestone as a key raw material.
Cheap and assured power supply will improve viability of cement units which is otherwise low due to high transportation costs of limestone outside the state. The growth of specific sectors will introduce industrial opportunities to the population which is relatively less oriented and skilled for industrial activities. This may have a spill over effect for skill development in other industries.
Another potential reform area for the state governments is to work on land reforms. Despite land availability, land acquisition for industrial purposes remains a problem due to ownership ambiguities. Transferability of land rights, specifically in the hilly areas of the states as compared with the plain, is also a constraint on bank credit. Cadastral surveys and land settlement will be helpful to ascertain formal property rights which will facilitate land acquisition for business and market operations.
The aspirers are required to fasten their belts and move in top gear on reforming the business-to-government environment. Although no reform areas can be ignored for action, reform priorities can surely be identified based on regional and local characteristics.
For instance, smoothening and expediting the environmental clearances for existing and new business, and land reforms, appear to have low hanging fruits for business facilitation in the Northeastern states.
(The writer is Associate Professor, Institute of Studies in Industrial Development, New Delhi)