empowering india - cover story (business digest, jan 2012)
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A slightly in-depth look at the campaignTRANSCRIPT
BUSINESS DIGESTVOL. NO. 8 ISSUE NO. 10 JANUARY 2012
EMPOWERING
INDIA
Pranab Mukherjee, Anand Sharma and Arun Jaitley at FICCI’s 84th Annual General Meeting
Improving Business
Insi
de…
Cover Story: » Empowering India project gets going» GDP growth may slip to 7.5% or less
in 2011-12: Pranab Mukherjee » FDI in multi-brand retail only through
consensus: Anand Sharma» GST delay on fears that Centre may be
unfair to non-UPA states: Arun Jaitley» Create wealth without sacrificing value
system: Swamiji Tejomaynanda » President Harsh Mariwala address
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Secretary General’s Message
R. V. Kanoria is new FICCI President
Kanoria lays out road map for FICCI
Economic Outlook Survey
India’s energy security on fragile ground: FICCI-E&Y Report
FICCI survey on water use by industry
Geospatial Empowerment – Paradigm for the Future
Mega Trends: FICCI, Jeremy Rifkin introduce Third Industrial
Revolution model to move to a post-carbon era
PM urges telecom industry to beef up domestic
R&D & manufacturing capability
Harvard Professor Dani Rodrik proposes new ‘traffic rules’ for the
world economy
India assumes presidentship of SAARC Chamber of
Commerce & Industry
FICCI’s anti-piracy initiatives gain further momentum
States Initiatives
» FICCI study delves into corporate patronage to art
» Maharashtra creating industrial growth benchmark for the country: CM
» Technical Textiles: Nagpur and Pune workshops evince keen interest...
Macro-economic indicators
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BUSINESS DIGESTVOL. NO. 8 ISSUE NO. 10 JANUARY 2012
EMPOWERING
INDIA
Pranab Mukherjee, Anand Sharma and Arun Jaitley at FICCI’s 84th Annual General Meeting
Improving Business
For Advertising, please write to: publications@�cci.com
Bid to improve business environment
FICCI launches Empowering India project
The Federation of Indian Chambers of Commerce and Industry (FICCI), in
partnership with Bain & Company, India, has launched a nationwide Empowering India project with the release of a report that identi�es opportunities to improve the business environment across all states.
�e report identi�es best practices and high-impact reforms that have been implemented across 7 major states along 12 key factors; the report outlines actionable recommendations for implementing similar reforms in other states. �e states reviewed were Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Rajasthan, Tamil Nadu and West Bengal.
Some of the �ndings showed that Andhra Pradesh, with its time-bound single-window mechanism, supported by legislation, has considerably eased the burden of businesses in the state while Tamil Nadu leads in the promotion of industrial clusters as is demonstrated by its large automotive cluster, one of the top 10 in the world.
“In the next phase we hope to expand our coverage to the remaining major states as well, and therea�er bring the entire country under the project fold” said Harsh Mariwala, President, FICCI.
�e report and its recommendations were developed a�er seeking perspectives from government and industry through 180 interviews as well as a survey of 75 FICCI members.
Other �ndings see Gujarat emerging as one of the leaders in land acquisition due to a transparent policy, which incorporates the inputs of all stakeholders, as well as a more e�ective process enabled by its computerized land bank system that helps investors to choose suitable land.
Karnataka has introduced noticeable reforms in property regis-tration with a computerized process and ‘anywhere’ registration across major urban areas. Karnataka has also initiated progressive reforms to simplify the process of obtaining construction permits by introducing a provision for online submission of building plans in Bengaluru.
Recent initiatives by the Maharashtra government to improve
Gujarat
Gujarat, Karnataka
Karnataka (Bengaluru)
Rajasthan, Andhra
Pradesh &Tamil Nadu
Maharashtra
Rajasthan,Gujarat
Maharashtra,Gujarat
Tamil Nadu, Gujarat
Gujarat
Japan, Korea
Singapore, Portugal, Egypt
Egypt, Denmark, China
Singapore, HK, Mexico
Multiple countries
Brazil, France
US, UK
Singapore
Japan, China
Azerbaijan, China
Land acquisition
Property registration
Labour reforms
Single window clearance
mechanism
ObtainingConstruction permits
Availability of Power
Paymentof taxes
Industrial clusters
InformationAvailability
Environment related compliances
1
2
3
4
5
6
7
8
9
10
Rajasthan, Karnataka
International examples
Domestic best practice
(primary focus)
Domestic best practice frontier with international examples
Legend: In each of the spider �gures, the outer Green frontier indicates strong practices implemented internationally. �e Yellow frontier shows the strongest practices/initiatives identi�ed across 7 states, and the Red frontier in the following �gures indicates the position of each State. �e distance between each frontier is a qualitative assessment of the opportunity available to each state for introducing reforms.
16 || FICCI Business Digest || January 2012
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the administration of labour laws include introducing an online labour management system, which promises signi�cant impact.
According to Ashish Singh, Chairman, Bain & Company India Pvt Limited., “�e report makes it clear that several states have started to take proactive steps towards improving their business environment. However, there remains signi�cant potential for further improvement, which we believe can be greatly aided by learning from one other. Each state in India today is in the enviable position of facing a number of attractive growth opportunities, which, if supported by an environment that is more geared towards business, can set the stage for tremendous development in the near future.”
�e Empowering India report aims to help states chart a path for reforms that will transform India and make it a more dynamic, progressive and business friendly economy.
�e report also showed that Rajasthan has handled its power situation e�ectively to reduce its de�cit, with signi�cant thrust on alternate sources of energy. West Bengal, though not known recently for its industrial leadership, has also launched a single window system, including a common application form which cuts down the application form from 99 pages to seven.
All these examples highlight that a compelling opportunity exists for states to further improve their business environment by learning from the experience and best practices of one another. Hence, the focus of the report is on learning from best practices across Indian States to make sure our recommendations are practical and grounded in realities that exist in India today.
�e 12 identi�ed factors in�uencing the business environment are: land acquisition, property registration, obtaining construction permits, single window mechanism, availability of power, industry clusters, availability of information, labour practices, environment-related clearances, payment of taxes, dispute resolution and exit procedures. In ten of these 12 factors, we found examples where
RELATIVE PERFORMANCE AMONG STATES
Land acquisition
Property
registration
Labour reforms
Single
window clearance
mechanism
Obtaining
Construction permits
Payment
of taxes
Industrial
clusters
Information
Availability
Environment
related compliances
1
2
3
4
5
6
7
8
9
10
Availability
of Power
Land acquisition
Property
registration
Labour reforms
Single
window clearance
mechanism
Obtaining
Construction permits
Payment
of taxes
Industrial
clusters
Information
Availability
Environment
related compliances
1
2
3
4
5
6
7
8
9
10
Availability
of Power
Andhra Pradesh Gujarat
Land acquisition
Property
registration
Labour reforms
Single
window clearance
mechanism
Obtaining
Construction permits
Payment
of taxes
Industrial
clusters
Information
Availability
Environment
related compliances
1
2
3
4
5
6
7
8
9
10
Availability
of Power
Land acquisition
Property
registration
Labour reforms
Single
window clearance
mechanism
Obtaining
Construction permits
Payment
of taxes
Industrial
clusters
Information
Availability
Environment
related compliances
1
2
3
4
5
6
7
8
9
10
Availability
of Power
Karnataka Maharasthra
Property
registration
Labour reforms
Single
window clearance
mechanism
Obtaining
Construction permits
Payment
of taxes
Industrial
clusters
Information
Availability
Environment
related compliances
2
3
4
5
6
7
8
9
10
Availability
of Power
Land acquisition
Property
registration
Labour reforms
Single
window clearance
mechanism
Obtaining
Construction permits
Payment
of taxes
Industrial
clusters
Information
Availability
Environment
related compliances
1
2
3
4
5
6
7
8
9
10
Availability
of Power
Rajasthan Tamil Nadu
Land acquisition
Property
registration
Labour reforms
Single
window clearance
mechanism
Obtaining
Construction permits
Payment
of taxes
Industrial
clusters
Information
Availability
Environment
related compliances
1
2
3
4
5
6
7
8
9
10
Availability
of Power
West Bengal
states have demonstrated clear best practices or implemented strong initiatives to improve the business environment. In the remaining two factors (commercial dispute resolution and exit procedures), no clear state-led reforms emerged as the role of the Judiciary or the Centre is much stronger.
India is among the fastest growing economies – it has grown at 8% annually in real terms since 2001 and is expected to account for nearly 10% of the growth in global GDP from 2010 to 2020. Investors continue to be drawn towards India with FDI in�ows increasing more than 250 times from $140million in 1990 to $36 billion today. However, they continue
January 2012 || FICCI Business Digest || 17
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to face challenges in dealing with the current regulatory environment and some of the associated complex and time-consuming procedures required to set up and run a business in the country. �e clear silver lining is that states have recognized the need for improvement and have already introduced a number of reforms to improve the business environment and facilitate industry.
�e Empowering India project report addresses four key themes: the policy framework, e�ectiveness of procedures, critical enablers to enhance e�ectiveness, and the implementation discipline to make the various initiatives work. Implem-entation discipline is a frequently occurring theme throughout this report.
Industry, across states in India, expresses the urgency to strengthen implementation. Most states have introduced strong policy frameworks and procedural improvements but leave a lot to be desired in terms of implementation. Strengthening implementation involves cultivating a performance-driven culture among government departments; �xing clear ownership among individuals and departments who are empowered to enforce time-bound deliverables from all involved parties; establishing clear metrics to track and measure performance; and aligning incentives with performance. Furthermore, the enforcement of initiatives must be tracked through user feedback.
Industry feedback on states’ business environment varied heavily between states – not due to the absence of policy frameworks, but rather due to the varying perceptions of implementation e�ectiveness.
�e report notes that the proof of all initiatives lies in dogged and unyielding implementation on the ground, which makes investors note and acknowledge changes, and enhances their con�dence in the reforms e�ort of any government.
�e extent of reforms in each State suggests signi�cant opportunity for States by adopting domestic and international best practices
�e current status of best practice initiatives across the country along ten key factors (ex-commercial disputes and exit procedures) is shown below in relation to some international examples. �e graphic shows the international examples and the gap between the intern-ational examples and the best practices implemented in India. �e considerable distance between the Indian best practice frontier and the international example frontier shows that while many states have introduced strong reforms that other states can learn from and replicate,
there is still signi�cant room for improvement. Even in states that currently have the ‘best practices’, policies need to be more broad-based and implementation needs to be strengthened heavily before they can reach the standards being followed internationally.
�e current status of all the seven individual states along these factors has also been indicated in subsequent �gures.
Looking at the initiatives implemented in di�erent States, it is clear that reforms in the business environment are being treated as a high priority for each State. To varying degrees, all States have begun the process of investor-friendly reforms. At the same time, there is signi�cant room for further improvement as initiatives are taken o� the ground and launched into full blown implementation.
�e success of reforms depends on four key themes:
policy framework
for investors
implementation
Introduction of the appropriate policy frameworks
Improvements to existing policy frameworks
Suggestions to rationalize regimes
Reduction, simplification, consolidation or digitization of procedures to bring about greater speed and responsiveness
Enablers such as IT-enablement, GIS as well as incentives to facilitate procedural improvements
Strong tracking and monitoring mechanisms to measure progress
Clearly defined individual and departmental accountabilities enforcedthrough robust target-setting, monitoring and rewards/ penalties
Strong
Policy frameworkIm
plem
enta
tion
disc
iplin
e
Critical enablers
Impr
ovem
ents
in
Proc
edur
es
Improvedbusiness
environment
In the context of India, strengthening implementation becomes even more important as a large number of strong initiatives bear the risk of losing e�ectiveness due to lack of adequate or consistent implementation. �is may be driven by accountabilities which are not clear or not adequately enforced and o�en lack of measurable matrices for individuals involved.Based on best practice initiatives introduced and implemented by various Indian States and also reforms introduced in other countries, we have dra�ed recommendations for the ‘model template’ for a state. �e recommendations aim to address the above mentioned four critical components of reforms: policies, procedures, enablers and implementation.
RECOMMENDATION THEMES
�e Empowering India report aims to help states chart a path for reforms that will transform India and make it a more dynamic, progressive and business friendly economy.
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