Why Gujarat, Haryana, Karnataka fell in ease of business rankings

Considered pro-business states, Gujarat, Haryana, and Karnataka saw a steep fall in their rankings in a Union government survey for 2019, conducted to gauge the ease of doing business environment. Officials and experts attributed the fall to a lack of response from industry to the survey and political instability in Karnataka.

While Gujarat had topped the chart in the 2015 survey, its ranking declined to 3rd the following year. It again fell to 5th in 2017 and further to 10th in 2019, the data for which was released on Saturday by the Department for Promotion of Industry and

Internal Trade (DPIIT).

Haryana improved its ranking from 14th in 2015 to 6th in 2016, and 3rd the next year, but it fell to 16th in 2019.

Karnataka saw its ranking taking a knock and falling four places to 13th in 2016, from 9th in the previous year. However, it improved to 8th in 2017, but tumbled to the 17th position in 2019.

Gujarat: Rising competitiveness a worry

“There are now states in the top five which were not there in the first few editions,” said Sunil Parekh, strategic industrial advisor to several large companies. “Also, Gujarat is not paying enough attention to maintaining its position.”

Quoting a CMIE report, Parekh said Gujarat has also been falling in terms of attracting investments.

“While the rankings look at ease of doing business, industries look at cost of operations while deciding investments. In 2019, Gujarat received a lot of investments, but that is also on a decline now. Hence, the state will have to look at all the aspects that affect both ease and cost of doing business,” Parekh adds.

Gujarat’s Additional Chief Secretary Manoj Kumar Das told Business Standard, “The DPIIT and the NITI Aayog have been ranking states on various parameters. For economic and industrial activities there are four indicators: ease of doing business, logistics index, export preparedness index, and start-up index. Gujarat has secured first position in the second, third and fourth indices.” According to Das, there were 187 reform parameters across 18 departments. “We submitted all the reforms to the

Centre. The World Bank and the Union government teams acknowledged these. But when they called the users from the database, it seems most did not respond,” Das said. He added those who responded mostly showed satisfaction. “Marks are awarded for only positive responses. No response means no marks, akin to a negative response. That’s why we have not got the ranking we deserve otherwise.”

Haryana: Waiting for more data

State BJP chief spokesperson Rajeev Jaitley said these rankings consider two dimensions: implementation of reforms and feedback from users. “Our score on implementing reforms is 100 per cent, an improvement from 99.73 per cent in 2017 when Haryana ranked 3rd.” The score on feedback has yet not been released by the DPIIT. In 2017, on this count, the state’s score was 82.89 per cent, and Jaitley said the state is waiting for this data. He assured that either way, the state will ensure that no laxity occurs in implementation of reforms and good user experience in the ongoing reform drive so as to improve not only these rankings but also the Ease of Living Index.

Karnataka: Next year to see impact of reforms

The BJP government came back to power in July last year after the collapse of the Jds-congress coalition. Experts say even though the BJP promised stability, a lot of its focus went towards ensuring that the Opposition, which supported it during the no-confidence motion, was adequately rewarded.

However, in the past few months, the government has undertaken some reforms and launched initiatives, including the

Land Reforms Act and Karnataka Industrial (Facilitation) Act.

“Most of the reforms have been undertaken after March whereas this survey took place between April 2019 and April 2020. This will be reflected in the next survey and we are optimistic that we will be in the top 5 for FY20,” Jagadish Shettar, industries minister of Karnataka, told Business Standard. He said the state also saw several natural disasters.

“From April 2020 onwards, even as the country was under lockdown, we got the approval for a ~31,000-crore investment and implemented many reforms,” added Shettar. According to R S Deshpande, a former director of Institute for Social and Economic Change, “The state has taken initiatives that are highly employment-oriented, while on the policy front, it has eased some of the earlier restrictions.”