Centre’s ease of doing business ranking of states draws criticism


The ease of doing business ranking of state governments released by the Centre on Saturday drew sharp criticism from some states and analysts with the industry department relying purely on user feedback for the rankings that saw wide fluctuation in positions of some states.

The most surprising was the ranking of Uttar Pradesh which vaulted 10 slots to the 2nd position just behind Andhra Pradesh.

In a series of tweets, the UP government said the sharp improvement in ranking is because of the wider acceptance of ‘Nivesh Mitra’ portal among industry which has received 18,120 grievances out of which 17,752 have been successfully resolved at an ‘outstanding’ resolution rate of 98%. “Maximum approval of BRAP (Business Reform Action Plan, 2019) reforms and higher user feedback satisfaction record on Nivesh Mitra portal have played a critical role in achieving this remarkable milestone for UP,” Alok Kumar, additional chief secretary was quoted by the UP government Twitter handle.

The Department for Promotion of Industry and Internal Trade (DPIIT) shifted to 100% user feedback based assessment to rank states for 2019. States were given 187 reform points for improvement in 12 business regulatory areas such as access to information and transparency enablers, labour regulation enablers, construction permit enablers, single window system, inspection enables, paying taxes, land availability and allotment, contract enforcement among others. DPIIT has not yet released how states have been fared in each of the reform areas.

Odisha government which saw the state’s ranking dip by 15 slots to the bottom of the table at 29th position said it will take up the matter with DPIIT. “It is understood that the survey agency appointed by DPIIT could not complete the feedback survey with the industries and MSMEs in the state and therefore the reforms implemented by the state could not be accounted for. There seems to be incongruity in the results as states/UTs which have implemented no/much lower number of reforms have been ranked higher than states which have implemented significant reforms,” Odisha government said in a statement.

A DPIIT official on condition of anonymity said the rankings for 2019 are based on a list of users of reform processes that states themselves provided. “The minimum response we required was 20 per state. So some states have seen sharp dip in their rankings because either they did not provide an exhaustive list or the respondents genuinely ranked it low,” he added.

Jaijit Bhattacharya, president at Centre for Digital Economy Policy Research said the methodology adopted by DPIIT is significantly different from what was followed by DPIIT in its first EODB rating in 2014.“ It would be more appropriate if the evaluation process is a mix of actual processes, user feedback and “mystery shopping” by tracking an actual investor who is setting up a plant in a state, keeping his identity confidential,” he added.

Dr. Bhattacharya said he is surprised about the sharp jump in UP’s ranking. “We see limited improvement in business environment in UP because there is a gap in policy improvement and actual implementation of that on the ground,” he added.

Arindam Guha, partner at Deloitte said only relying upon investor feedback to rank states brings an element of subjectivity. “Going forward, it is important that all reforms data by states are hosted on a technology platform. For example, if you are really talking about a single window which is integrated at the state level, then ideally DPIIT should have access to that platform. So the transaction data in the system starting from the time one applies for a license and the time it receives approval should be the basis of ranking. That’s the most objective way of doing it,” he added.

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