Competitive federalism

WHILE THE economic discourse in India tends to be largely fixated on reforms at the Centre, state governments have an equal if not greater impact on the country’s competitiveness.

In order to shed light on differences in competitiveness across the states, a new study by the National Council of Applied Economic Research (NCAER) ranks 21 states on six indicators — land, labour, infrastructure, the economic climate, governance and political stability, and a survey, which gauges public perceptions about the state.

The study finds Gujarat is the most competitive state in India, while Haryana and Telangana have made massive strides in improving their business investment potential, as seen in Chart 1. Some states have made significant strides in select areas. Bihar, for example, has jumped 10 spots on the labour index, as seen in Chart 2. Similarly, Maharashtra has risen by five spots on the infrastructure index.

It is interesting to note that while West Bengal has jumped 11 spots on economic climate and six on governance and political stability, it has fallen six places in overall rankings. A closer look reveals it is largely due to a deterioration in perception regarding the state. On the perception sub-index, the state’s score has dropped from 40.8 in 2016 to 8.7, with a deterioration seen on land and business climate. The state now ranks 21 in perceptions index, as seen in Chart 3.

A similar trend is witnessed in Chhattisgarh. While the state’s overall ranking has fallen seven spots, it has improved its score on every sub-indicator other than perceptions regarding the state. At the other end of the spectrum, Haryana now ranks first on governance and has seen a sharp improvement in perceptions regarding the state (Chart 4). A similar improvement is visible in Telangana, which now leads the ranking on digitisation of land records.