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Current Affairs

Ease of Doing Business

Date: 17 September 2020 Tags: Reports & Indices

Issue

The latest ease of doing business rankings for Indian states, released by the Department for Promotion of Industry and Internal Trade (DPIIT), have thrown up some interesting results.

 

Background

The objective of DPIIT’s reform exercise is to provide a business-friendly environment, for which the regulations in a state have to be made simpler.

 

Details

  • DPIIT provides a set of recommendations meant to reduce the time and effort spent by businesses on compliance with regulation called the Business Reform Action Plan (BRAP).

  • BRAP 2019 is an 80-point list of reforms recommended to simplify, rationalise and digitise the regulatory framework in a state.

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

  • States are required to submit proof of implementing each reform on the DPIIT’s EoDB portal and submit a list of users of these reforms.

  • A sample of these users is then surveyed to determine the efficacy of these reforms. Each question is assigned a weight. The final score is a weighted average of all the responses applicable to a state.

  • DPIIT recommends all states have a single-window system that provides all necessary information on permits and licences required for starting a business.

  • Permissions required from municipal or village government bodies or police for activities like filming movies should also be explicitly mentioned.

  • For the first time since its inception in 2015, the BRAP rankings relied entirely on the feedback it received from the businesses for whom these reforms were intended.

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

  • The methodology used by the DPIIT awards points on a reform to a state only if there was an adequate response from users of that response.

  • Except for Andhra Pradesh, the top-ranking states as per these rankings do not have high shares in the total investment during the year.

  • This is because businesses respond to other conditions like the availability of skilled labour, infrastructure, finance, etc.

  • In addition, these rankings do not consider the cost of doing business, which is what matters to businesses at the end of the day.