States’ Policy Conclave 2021- Role of States’ in Making Atmanirbhar Bharat (Self-reliant India)

Key Takeaways:

• Through its deliberations, the Conclave organised by PHDCCI and the India Office of the Konrad-Adenauer-Stiftung (KAS) aimed to take the momentum further in policy space and celebrate “Azadi ka Amrit Mahotsav” on 75th year of India’s independence and the glorious journey.
• Policies should be directed to enable the Sustainable Industrial Development in states.
• Impact of states’ progressive policies on sectoral development (with case studies of success stories) should be made the basis of good governance and industrial development.
• The Conclave put forward the growth vision for the states: Ease of Doing Business (EoDB); Sustainable Development Goals; New Technology; Inclusive Growth
• Economic rebounding in the post-pandemic world should drive the policies and the States in India should play pivotal roles for a successful transition.
• Centre and the states should continue to work under a robust federal system and further strengthen the coordination for streamlining the public policies to impact on ground.
• While economic growth is important, equally important is environmental protection. Hence, sustainable development should drive the policymaking and implementations on ground.
• To mitigate the challenges of the public health crisis, the public health system should be made more efficient.
• Uniformity in the development is needed, as the gaps in the developmental performances among the states in India are glaring.
• New avenues of growth should be explored with giving impetus to the local area development, Micro, Small and Medium Enterprises (MSMEs) and improved mobility and market linkages.
• Need for monitoring business reforms at the state/Union Territory (UT) level:
  • India being a federal economy, businesses, besides the Central Government regulations, also have to comply with several rules, laws and procedures enforced by the respective State Governments in the form of obtaining a large number of licenses, registrations, among others which add to the compliances.
  • Further, World Bank’s Ease of Doing Business Index ranking of India is based on the reforms undertaken by only two major states/UTs of India namely Mumbai and Delhi. Ranking is not based on reforms undertaken by other states’ and UTs. 

In the light of the above arguments, it is necessary to assess and monitor the performance of other states and UTs on business reforms undertaken by them.

• India lives in its States with cultural diversity and homogenous policy implementation towards a common agenda of a higher economic growth trajectory.
• Under the federal set up, the Indian states and UTs are the key movers of economic growth and have continued to make achievements in socio-economic and industrial development.
• Over the years, the states have proactively focused on overall economic development, bolstering the social welfare, spurring the manufacturing sector, strengthening the agriculture sector, vitalizing the services sector, women empowerment, health and education, fostering entrepreneurship ecosystem, handholding the MSMEs and enhancing the infrastructure development.
• Each State of India possesses its own unique characteristics, which makes every State a leader in itself.
• Over the years, the States have been undertaking effective reform measures to reduce the regulatory burden on businesses, inculcate entrepreneurship spirit, promote conducive business environment and make their respective States the desirable investment destinations.
• According to Business Reforms Action Plan (BRAP) Rankings of Department for Promotion of Industry and Internal Trade (DPIIT), Andhra Pradesh has retained its 1st rank since the last three years’ rankings. Uttar Pradesh has ranked 2nd in the ease of doing business in 2018-2019, up from 12th rank in 2017-18. On the Start-up ecosystem front, Gujarat has been the best performer in DPIIT’s startup rankings of 2019 and Karnataka and Kerala have been among the top performing states.
• The states’ collective efforts contribute in laying the solid foundation for the growth of the country.
• At this juncture, when the Indian economy is affected by the daunting impact of Coronavirus, the role of states has become increasingly more crucial in sustaining the overall growth and development of the country.
• Highlights of PHDCCI Report Released During the Conclave (States’ Policy Conclave 2021: Role of States’ in Making Atmanirbhar Bharat (Self-reliant India): A comparative analysis on the macroeconomic resilience of the States in the pandemic times for FY 2019-20 and FY 2020-21 on the basis of 5 broad macroeconomic parameters of the States including Gross State Domestic Product (GSDP) growth rate (at current prices), Consumer Price Index (CPI) Inflation, Fiscal Deficit as percentage of GSDP, Industrial Investment Proposals and Unemployment, has been conducted. According to the analysis, Gujarat has emerged as the most resilient State in FY 2020-21 and maintained its highest position among the top 10 States as Gujarat was also at the top in FY 2019-20. Karnataka has emerged as the second most resilient State, whose position has improved from 4th rank in FY 2019-20 to 2nd rank in FY 2020-21. Similarly, Odisha has improved from 7th position in top 10 most resilient States in FY 2019-20 to 3rd position in FY 2020-21. Maharashtra, NCT Delhi, Telangana, West Bengal, Uttar Pradesh, Madhya Pradesh and Chhattisgarh are the other strong States in top 10 resilient States in FY 2020-21.
• As the states are on their way to rapid industrialization, coordinated development of small, medium and large scale enterprises are necessary as they offer a favorable environment for attracting industrial investments through user friendly policies and better infrastructural support.
• The states should enhance their existing capacities of specialized areas and at the same time should adopt best practices of other states for the improvement in various segments of their respective economies.
• Further, in order to boost the growth of the industrial sector, the states must focus on skill development, research and innovation and good governance along with the State of the art infrastructure so as to improve the competitiveness of businesses.
• At the socio economic front, the states have taken effective measures towards the implementation of reforms in healthcare, education and other socio-economic segments.
• To bolster the growth of the service sector, the State Governments must design & develop services led growth strategy focusing on health, education, IT, logistics, knowledge based and non-polluting services, sports, among others. Further, new business ventures in the services sector should be encouraged by the states’ for which easy availability of loans and simplification of the regulatory process should be promoted.
• Development of the services sector would inculcate the spirit of entrepreneurship within the states’ economy, which would aid the economy in reaching a higher growth trajectory.
• Exports play a vital role in economic growth. Hence, there is a need to provide more facilities/incentives to the exporting units for increasing exports from the States.
• The State Governments should constantly work towards improvement in infrastructure, as it is an important growth driver and its development is essential for long term growth prospects of the economy.
• The states should seize the true spirit of the Business Reform Action Plan and further enhance their performance in ease of doing business to provide a conducive business environment, attract investments, foster competition, among others.
• Encouraging and incentivizing the private sector would uplift the industrially backward regions of the states.
• Other states should adopt the best practices set by the top rankers to promote ease of doing business. Similarly, the reforms undertaken by the states’ to spur the startup ecosystem is laudable and it is commended that aspiring performers and emerging performers should adopt the model practices set by the best and top performers to foster the startup ecosystem.
• Further, focus on use of environment-friendly technologies would enable sustainable development of the States. Encouraging efficient use of waste land and water vis-à-vis promoting usage of alternate sources of energy would bring further efficiency in states’ industrial sector.
• MSMEs sector has potential to drive growth of the manufacturing sector and boost employment in the states. Assurance of easy loans for MSMEs at low interest, initiatives to encourage private participation, basic problems, such as R&D/Innovation, access to technology, marketing support, among others would boost MSMEs in the states.
• The mutual learning among all the states should be encouraged as it provides support in policy formulation towards the national development agenda. It is suggested that states should share the best practices and capacity development. These collaborative and cooperative practices are evident during the pandemic period. All States have been at the forefront in providing support measures and respective fiscal stimulus packages during the covid-19 pandemic.
• Land reforms are seen to be the most important focus areas for all states’ since land is a major ingredient in the four factors of production, so the availability of land becomes crucial for industrialisation.
• The State Governments will have to play a proactive role in making land available for setting up of industries in their respective territories. The states’ can do so by creating a “land bank” for the use of the industry or by giving long-term leasing in states’ where outright purchase is not possible.
• Infrastructure development in all states wherein provision of social infrastructure such as education and health and physical infrastructure such as hospitals in every district is the key to improve the industrial setup within the state.
• The State Governments should also focus on reforms in the power sector by giving high priority to transmission and distribution networks. Tourism sector could also be improved by constructing better roads, well managed tourist lodges and updated websites having information about day to day climate and information about the state.
• The role of states is expected to be increasingly more critical in sustaining the overall development of the country in coming times. Several challenges to their growth, such as easing the supply side constraints in the economy, upskilling the workforce and increasing manufacturing competitiveness are still the major areas of concern.
• The state policies should be focusing on diversifying the beneficiaries of the socio economic development programmes to ensure an all-inclusive growth in the country.
• Enhanced focus on the ease of doing business, particularly for the MSMEs with reduced cost of doing business, reforms for the growth of manufacturing, development of the state-of-art infrastructure, investments conducive policies along with focus on socio-economic development such as health and education, would go a long way to enhance the resilience of the states and to achieve a level of strong and sustainable economic growth trajectory in the coming times.