NEW DELHI: The World Bank's controversial annual report comparing the ease of doing business across countries will soon have a local equivalent, with the Centre initiating an annual exercise to assess the investment climate and business regulations in different states.
But taking a cue from the severe criticism of the Bank's methods to rank countries, India has decided to skip the idea of ranking states on different factors. Instead, these annual assessments would focus on benchmarking states' regulations vis-a-vis their peers and enable states to frame their own reform agendas by sharing best practices.
The Planning Commission is developing the tools to evaluate the business environment in states as part of the implementation strategy for the National Manufacturing Plan (NMP), which aims to raise the sector's contribution to the economy from 16% to 26% by 2024 and create 100 million jobs in the process.
"Many of the key areas, where the shoe pinches businesses the most, such as labour and environmental regulations and getting a space to operate from, are in state governments' domains," said a senior official in the Commission.
"We are in the process of selecting a knowledge partner to create a framework for this exercise," the official said, stressing that it will not examine the competitiveness enjoyed by states due to their location or natural resources, but policy issues.
States would be assessed on ten parameters, including four of the most critical areas identified under the NMP - the environment for technology transfer and joint ventures, labour regulations and skill development opportunities, the functioning of clusters and small scale industries and the overall business regulatory environment.
"Fund allocations from the Centre to states are peanuts compared to their own kitties, yet we must strive to induce states to improve their regulatory regimes," said another senior official involved in the process, drawing a parallel between this initiative and the World Bank's Doing Business Report.
"The World Bank is no longer the big lender to countries as it used to be and though the rankings it assigns to countries are questionable, the intention behind its annual report is to help nations improve their policies and create more jobs," he said.
While the ministry of micro small and medium enterprises (MSME) and the National Manufacturing Competitiveness Council have agreed to champion the issues that come under their domains, the industry ministry has objected to the idea stating this was tantamount to the Commission treading on the ministry's turf of industrial policy and promotion.
turf of industrial policy and promotion. "The only focus of the industry ministry seems to be the grand plan of building new national manufacturing investment zones, rather than policy issues affecting industry," an official in the think-tank remarked. "We have reported back to them that it is part of the Planning Commission's job to develop processes and tools to help implement government plans," he added.
Inter-ministerial turf battles have often thwarted such system-wide initiatives. Even the MSME ministry had initially told the Commission that the ministries of industry, heavy industry and electronics and IT already looked at different aspects of small-scale industries, leaving them with little to do. The Commission has impressed upon it the role it can play as an enabler for other line ministries by taking ownership of a new tool developed for rating industrial clusters.
"We have already selected an agency to do an annual report on such clusters and flesh out the improvements made each year. This can throw up several ideas for policy action and the MSME ministry has agreed to run with it," said the Plan panel official quoted earlier.