In the fourth quarter of 2016, Haryana, Gujarat and Maharashtra have led the way in making reforms.
These three states had a combined 12 legal or regulatory reforms which helped to improve their business environment.
What are the significant reforms taken by state government?
States exert a tremendous level of control over many facets of the business environment in India.
The Centre dominates heavily regulated sectors, including most services industries, as well as market access and trade liberalization.
Beyond that, states play the dominant role.
Most business licences are controlled by state agencies.
Key inputs like electricity, water, and sanitation largely rely on state agencies.
And states split authority with the Central government over other key issues such as land acquisition and labour regulations.
Among the 13 large states, there were a total of 14 positive reforms in the fourth quarter of 2016, compared to an average of 10 significant positive reforms in the previous two quarters.
Apart from the three states noted above, Delhi and West Bengal each took positive steps to improve their business climate.
Changes to land regulations, both industrial and residential, were among the more common reforms during this period.
This is likely a reflection of the fact that there seems to be little hope for significant land acquisition reforms at the Centre.
A couple of examples of the types of steps taken include: Gujarat is poised to have another industrial boom, lifting a moratorium on new and expanding industrial facilities in Ankleshwar, Vapi, and Vatva.
Haryana is making land held by village councils available for development.
States had less success this quarter in further liberalization of India’s onerous labour regulations.
West Bengal had the lone reform in this space, easing regulations governing employment of teachers.
Apart from land and labour, Haryana and Maharashtra both had multiple significant reforms in other parts of their regulatory environment.
Haryana’s chief minister gave up “final authority” over development licences.
The state liberalized regulations on private transportation companies and introduced a new public procurement policy that should give a boost to small firms.
Maharashtra cut required permissions in the hospitality sector, and adopted new procurement rules meant to give start-ups some assistance in winning contracts.
Not all policymaking at the state level has been positive for business.
There are two regulatory changes proposed or implemented that would harm the local business climate in two states.
Karnataka has proposed 100% reservation for native workers in blue collar jobs.
Maharashtra’s Electricity Regulatory Commission has disallowed most facets of an important tariff hike requested by the Maharashtra State Electricity Distribution Co. Ltd.
There was also further developments in the balance of power between the Central and state governments.
Four more states signed on to the power-sector bailout package, Ujwal Discom Assurance Yojana (UDAY), bringing the total up to 21 (since then, Sikkim has also joined).
When signing on to the UDAY programme, states agree to several power-sector reforms outlined in the related agreements the state signs with the ministry of power.
In addition, the GST continues to move forward but slowly.
A compromise on power-sharing between the Central and state governments has been hammered out, and hopefully see the final legislative steps in mid-2017, allowing this critical tax reform to be rolled out this year.
Moving forward NITI AAYOG announced a new project to track health indicators in each state.
