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Ease of Doing Business

Prelims – Economy, Mains -GS3- Economic Development

1. Department for Promotion of Industry and Internal Trade (DPIIT) has released the ease of doing business rankings for Indian states.

2. The objective of ranking is to promote a business-friendly environment by inducing states to make the regulations simpler.

How are the rankings arrived at?

1. The ranking is done according to the ease of doing business in a state.

2. DPIIT recommends reforms under the Business Reform Action Plan (BRAP) to simplify, rationalise and digitise the regulatory framework in a state.

3. Reforms are grouped into 12 broad areas like land administration, labour regulation, obtaining electricity and water supply permits, environment regulation, etc.

4. States need to implement each reform and submit a list of users of these reforms. A sample of these users is surveyed to determine the efficacy.

What reforms does DPIIT recommend?

1. It recommends a single-window system for providing all necessary information on permits and licences required for starting a business.

2. Permissions required from municipal or village government bodies or police for activities like filming movies etc. are also mentioned.

3. To reduce delays, the duration of licences has to be extended or renewed automatically based on self-certification or third-party verification.

Why current & previous editions are not comparable?

1. Current BRAP rankings rely entirely on the feedback it received from the businesses for whom these reforms were intended.

2. Earlier editions computed scores based on the responses of the relevant state government departments.

3. The 2017-18 edition used a combination of state government and user feedback to compute the score. So, they are not comparable.

Which are the issues?

1. DPIIT’S methodology does not consider the actual number of reforms implemented by the states. States like Haryana and Gujarat have implemented all the reforms but were ranked low.

2. Gujarat has attributed to poor response from the survey respondents.

3. A number of respondents should be decided based on population or number of business clusters to ensure that the sample is representative of the state. It is not clear if DPIIT used representative samples.

4. But business owners’ expectations from the governments can differ. A business owner from TN may assess their state government’s IT portal differently from one in UP.

How do these reforms affect investments?

1. Top-ranking states have not necessarily been associated with higher shares of new investments announced during the year with an expectation of Andhra Pradesh.

2. It highlights factors like the availability of skilled labour, infrastructure, finance, and cost of doing business are not considered in the ranking.

Source: The Indian Express