+ State Level Reforms Critical for Growth - CII Blog

Charting Change, Enabling Development

Over the last few years, Central and State Governments have undertaken a slew of reforms to boost investments and growth. Key challenges for India are sustaining the high growth rates, alleviating poverty and ensuring balanced growth. As India enjoys a federal government system with many areas such as education, healthcare, agriculture, and so on under the domain of the State Governments, a strong reforms process in states can greatly contribute to these objectives.

In recent years, State Governments have taken major action for improving the climate for investment and have become growth magnets. To continue this process, there is need for all State Governments to introduce key facilitative policies. This will promote balanced regional growth.

Some of these policy areas are given below.

1.Agriculture

  • The Agriculture Produce and Marketing Committee (APMC) Act has been reformed and a new chapter was included on contract farming. However, there is a need to delist fruits, vegetables and other perishables from the Act.
  • For the promotion and facilitation of agricultural trade, the Government introduced the Agriculture Produce and Livestock Marketing (APLM) Act in 2017, which suggests new guidelines for reforming state marketing boards. Although most states have amended their laws, the State Governments need to ensure the fast uptake of the Act for improving marketing efficiencies.
  • NITI Aayog launched the Model Agriculture Land Leasing (MALL) Act in 2016 to encourage greater land leasing without alienating the ownership rights. Some states have adopted the Act partially and there is need for faster adoption of the Act across states.
  • The initiative to rank states based on Ease of Doing Agriculture Business (EODAB) is a welcome move and will help in ushering in much needed agri-reforms. The Ministry of Agriculture has already released an EODAB index for a state level ranking. This initiative needs to be monitored and institutionalized across states.
  • The Agriculture Export Policy was approved in 2018 to provide impetus to agriculture exports and double farmers’ income by 2022. The Act envisages doubling of agricultural exports from the present US$ 30 billion to US$60 billion by 2022 and further to US$100 billion in the next few years. State Governments could draw up specific agri-export policies depending on their agricultural patterns.

2.Ease of Doing Business

While India has moved closer to international practices on a national level with respect to Ease of Doing Business (EoDB) reforms, it has achieved substantial success in ease of doing business measures at the state level as well.

States/UTs were ranked on the basis of a set of comprehensive reforms on regulatory processes, policies, practices and procedures under the Business Reform Action Plan 2017, implemented by the Department for Promotion of Industry and Internal Trade (DPIIT). 

The original plan that included a 340-point action plan was updated to 372 action points with addition of new sectors such as healthcare and hospitality, central inspection system etc. At present, 15 states have achieved more than 90% achievement score. Under BRAP 2019, DPIIT proposes to undertake a 100% feedback-based assessment on all reform points to support the states in implementing BRAP 2019.

States can further progress with more efforts towards creating a conducive investment environment. Key EoDB measures where they can work include single window systems, digitization of land records, environmental clearances and e-governance, among others. Repealing redundant laws at the state level would also help.

3. Exports

Alignment of center-state export strategies is a necessary step for promoting exports in the country.

The Assistance to States for Developing Export Infrastructure and Allied Scheme (ASIDE), which was launched to address infrastructure gaps at the state level has been replaced with the Trade Infrastructure for Export Sector (TIES) scheme in 2017. The objective of the scheme is to aid with setting up and upgradation of infrastructure projects at the state level. State Governments can undertake projects aligned with their industrial policies and funds from the Central Government should be disbursed in a timely manner.

Products and sectors at the state level could be identified where they have significant export potential and a mapping exercise must be undertaken to identify industry clusters across the state for these products. State export incentives could accordingly be directed in a focused manner to aid companies producing these goods.

To improve India’s logistical performance and boost exports, a new Logistics Division was created in the Commerce Department in 2017. The division proposes to create an IT backbone and develop a National Logistics Information Portal to bring together various stakeholders including State Governments on a single platform for facilitating the integrated development of the sector.

4. Labor Reforms

In some states, the Factories Act and Industrial Disputes Act have been amended to raise the limit of number of employees in a firm where these Acts are applicable. Other states could similarly raise the threshold number of employees in their respective Acts, enabling more jobs to be created in the formal sector.

Further, the Central Government has notified the Fixed Term Employment orders developed through a consultative process of dialogue of trade unions and industry. As State Government are now at liberty to notify it as well, they should speedily introduce this provision, which would greatly facilitate job generation.

For simplifying labour regulations, the Government is in the process of consolidating, simplifying and rationalizing 44 labour laws into 4 labour codes. Legislation would require amendments of several laws as well as negotiations between State Governments, among others.

The involvement and active participation of the State Governments is critical for the overall development of the country. State Governments can aggressively spearhead the reform movement for stepping up their growth performance. Sensitizing the State Governments on various subjects including EODB, investments, and agricultural reforms, among others remains a key priority for CII. As a key partner in India’s development, CII is actively engaged in various state level initiatives through its state offices and remains committed to foster the regional development.