Survey on business reforms by states in India

We supported the World Bank Group (WBG) and Department for Promotion of Industry and Internal Trade (DPIIT) to develop the Business Reform Action Plan (BRAP) 2019 rankings, released jointly by the Finance Minister and the Commerce and Industry Minister, in September 2020. The aim of the BRAP exercise was to create enabling business regulatory environment by streamlining regulatory structures and facilitating a business-friendly investment climate in states across India.

To assess the extent and impact of reform implementation on ground, DPIIT released BRAP 2019 for implementation by States/UTs, and this round of assessment, conducted by OPM saw two major shifts – a consolidation of the reform action points (372 to 187), and a shift to a scoring methodology entirely based on user feedback.

Challenges

Traditionally, India has been perceived as a difficult place to undertake business. The performance of manufacturing as well as key regulatory interfaces varies significantly across Indian states. The indicators utilised in global surveys hide significant variations in constraints across states, and between sectors, and do not easily capture elements that affect competitiveness in complex ways. Variance in the state level business regulatory environment and constraints to micro, small, and medium enterprise performance provides a useful baseline for identifying areas of improvement for industrial development, as well as good practice – and implementation – examples from within India.

In the past few years the government has prioritised promoting business reform at the state level as one of the key pillars of the strategy to boost manufacturing growth with the launch of series of reforms under Make in India program, aiming to reduce regulatory burden and attract regional investment. This underlines the need for the BRAP rankings as a comprehensive and evolving tool to measure the on-ground impact of key regulatory reforms at the sub-national level which can be fed back into strengthening reform implementation across sectors.

Our approach

The final ranking was developed through an extensive data collection exercise that covered business across 32 states and union territories in India and gathered private sector feedback on some of the business environment reforms that have been undertaken by state governments. Over a period of three months, data from over 1.5 million businesses was processed and used for a phone survey. In the five weeks of core data collection, approximately 6,700 firm interviews were completed across 32 states and UTs, in 11 languages, and over 35,000 calls attempted by 60 callers who were managed by 10-plus managers.

Despite the sheer scale of the exercise and the technical complexities, the key to successfully completing this survey, was to ensure an open and continuous line of communication with the WBG team that helped us identify and diagnose problems swiftly. This ensured that all problems were reported in a transparent manner and the survey progress could be monitored through an agile and comprehensive quality control mechanism

The team was established as a combination of a survey steering and a monitoring committee. The sample of respondents for the survey was selected from lists of actual users of the reforms provided by state governments. To ensure that the respondents had actual experience with the reforms, the questionnaire included control questions to confirm the respondent’s experience of using the reformed services. Because of the scale of the survey, users who had availed the maximum number of government services in the feedback survey were given priority, as were firms that were clustered in nearby locations.

A key part of our approach to project management was to record and monitor risks to project implementation, scope, quality, budget, and security using a risk registry – a planning tool that lists a full set of potential risks and mitigation strategies.

Outcomes

The purpose of the BRAP exercise was to spur competition among states and the ranking is only an enabler, and not a goal in itself. The exercise indicated that there was a stark contrast in the experience of big and small businesses in dealing with business regulations. In addition, it strengthened the thinking that reform efforts must focus on appropriate levels of regulation, rather than over- or under-regulation. Even though the BRAP exercise is an evolving methodology and the inclusion of 100% user feedback-based scoring in the 2019 iteration was a learning experience; it is one of the few comprehensive business reform assessment tools that can provide a comparative picture of the regulatory landscape across the states. More than being a gold standard empirical exercise, what the exercise successfully does is foster a healthy sense of competition among states.

We partnered with Kadence International to conduct the survey.