Has Tamil Nadu really slipped in ease of doing business?

Chennai: The latest ranking of Indian States on ‘Implementation of Business Reforms (2016)’, by the Department of Industrial Policy and Promotion (DIPP) under the Union Ministry of Commerce and Industry, and the World Bank Group (WBG) that says Tamil Nadu has slipped to the 18th slot from its 12th rank last year seems only a nominal figure.

A closer look at the reports — though the PIB press release says that the ‘full report’ of the assessment of all the States and Union Territories (UT) will be published later in November — shows that Tamil Nadu has not done badly after all in the larger context of some of the methodological issues the new set of DIPP-WBG criteria have raised for all.

First, let us take a look at the facts vis-à-vis Tamil Nadu. The idea of a new index of ‘Ease of Doing Business’ and the criteria for the same originated at a conference of Chief Secretaries of all States / UTs’ – the ‘Make In India workshop - convened by the Central government in New Delhi in December 2014, when a broad consensus was reached on a “98-point-action plan”, with a provision to revise it later. The Centre had sought WBG’s help to India’s efforts to “enhance competitiveness and increase manufactured exports”.

Broadly, 8 areas of reforms by the States were then identified. They included “reforms needed in setting up a business, allotment of land and obtaining construction permits, complying with environment procedures, complying with labour regulations, obtaining infrastructure related utilities, registering and complying with tax procedures, carrying out inspections and the legal system to enforce contracts”.

While the first DIPP-WBG report took stock of reforms implemented by all States/UTs’ during January 1 to June 30, 2015 Tamil Nadu as per that ranking based on its responses to queries on the “98-point-action plan”, was said to have scored 44.58 per cent in a scorecard of 1-100 and ranked 12th.

Now, for the 2016 assessment, the DIPP-WBG’s ‘Business Reform Action Plan (BRAP)’ has swelled to a 340-points agenda, which requires action by the states to accelerate reforms. It is on this larger base, that the 2016 assessment of States has ranked Tamil Nadu in the 18th slot, giving it a score of 62.80 per cent. So, even on a quick comparative read, the State has only done better carrying the burden of a bigger basket, if not worse.

Secondly, the 2016 report has re-classified the scores attributed to the four categories - namely States which are ‘Leaders (90-100 per cent)’, States which are ‘Aspiring Leaders (70-90 per cent),’ States which come under the category of ‘Acceleration Required (40-70 per cent), and States / UTs’ at the bottom which come under the category, ‘Jump Start Needed (0-40 per cent)’.

The corresponding scores under each category respectively given in the 2015 assessment were 75 per cent, 50-75 per cent, 25-50 per cent and 0-25 per cent. These facts show that bar has been considerably raised for all States / UTs’.
While this straight points to the futility of applying the logic of ‘one-size-fits-all’, as each State post 1947, and subsequently after 1956 since the linguistic reorganisation of States took place, has developed in differing speeds under varying styles of political leadership, the period covered for the assessment in the second report is given as from July 1, 2015 to June 30, 2016.

Tamil Nadu, during a major part of that period, was in a general election mode and so were some other States like West Bengal and Kerala, when understandably the political focus is away from issues of procedural reforms to carry forward the economic liberalisation process. Also, Chennai faced an unprecedented deluge in December 2015. Despite these factors, Tamil Nadu has scored a higher percentage in the total implementation of reforms and successfully conducted a ‘Global Investors Meet’ in Chennai, belying impressions that it retarded in attracting new industrial investments.

In fact, two issues of concern are the civic infrastructure vulnerability after  the great floods and the farm distress this year in the Cauvery delta districts. Thus, the ‘slide’ in Tamil Nadu’s ranking in ‘ease of doing business’ in 2016 seems only nominal and not real.

A run through the latest 340-point ‘BRAP’ agenda, on the basis of which this ranking has taken place is simply mind-boggling. They require a new order of E-services in processes and outcomes with hardly any individual discretion. It shows the Centre wishes to have both ‘cooperative federalism’ and ‘competitive federalism’ among States simultaneously.

This raises another methodological issue, particularly in the context of the larger, unified Goods and Services Tax (GST) to soon come into place. States, which have laboured to establish a good manufacturing and services base over the past few decades need to be recognised for their ‘individual sagacity’, which a uniform ‘BARP’ tends to ignore. When taking world’s best practices, the reform agenda also raises key issues of Centre-State relations, which a pluralistic polity like ours can ignore only at its peril.

As Dr Montek Singh Ahluwalia, former deputy chairman of the erstwhile Planning Commission, pointed out in a recent article on GST, “the GST Council is an important new institution of governance in our federal system.” But unless the GST Council is supported by “an independent secretariat with technical expertise” that can inform the Council on the peculiarities and strengths of each State, Dr Montek implied that the new GST Council as a federal connect of all States, the Inter-State Council’s new de-politicised ‘avatar’ so to say, will not be effective.

And just one word on the new 340-point agenda for reforms: It reminds me of the then French Prime Minister Georges Clemenceau’s quip, when the then American President Woodrow Wilson presented “The Fourteen Points” peace plan to end World War-I in January 1918, “even the Good Lord has only Ten (the Ten Commandments)!”