NITI Aayog survey finds ease of doing business in high-growth states

NITI Aayog's Ease of Doing Business Report, based on a survey of enterprises across the country, has found that high-growth states provided an enabling environment for businesses to prosper while enterprise was found wanting in states with a restrictive environment.

Obstacles to investment decisions cited by businesses include those related to availability of land, construction re­lated approvals, environmental clearance, availability of water and sanitation related issues, according to the survey.

Enterprises in high-growth states are significantly less likely to report major or very severe obstacles related to land, environment and construction work, according to the survey findings.

The NITI Aayog report on ease of doing business is based on a survey of 3,500 manufacturing firms across states and union territories. The survey has been conducted, along with the IDFC Institute, to assess the business regulations and enabling environment across India from the firms' perspective.

The survey was jointly released by union minister of commerce and industry Nirmala Sitaraman and minister of law and justice and electronics and information technology Ravishankar Prasad at a function in the capital today.

Outgoing vice chairman of NITI Aayog Arvind Panagariya, his successor Rajiv Kumar who assumes office on 1 September,  CEO of NITI Aayog Amitabh Kant and the secretary, Department of Industrial Policy Promotion Ramesh Abhishek along with representatives from the industry, academia and senior officials of NITI Aayog were present on the occasion.

The Ease of Doing Business report based on an Enterprise Survey of 3,500 manufacturing firms Survey highlights the fact that India needs to create an environment that fosters globally competitive firms, capable of driving and sustaining economic growth.

The major findings of this report are as follows:

  • A higher level of economic activity and better performance on a range of doing business indicators are strongly correlated;
  • Enterprises in high-growth states are significantly less likely to report major or very severe obstacles related to land/ construction re­lated approvals, environmental approvals and water and sanitation and availability;
  • Firms located in high-growth states also report 25 per cent less power shortages in a typical month compared to firms in low-growth states;
  • Newer and younger firms re­port a more favorable business environment in that they take less time in obtaining approvals than older firms, suggesting an improvement in the business environment;
  • Newer firms include startups established after 2014;
  • In addition, young firms report that most regulatory processes do not constitute a major obstacle to their doing business;
  • States need to enhance awareness of the steps being undertaken by them to improve the ease of doing business. The survey data show low awareness among enterprises about single window systems instituted by states;
  • On an aver­age, about 20 per cent of start-ups, which are of recent origin, report using single window facilities introduced by state governments for setting up a business;
  • Even among experts, only 41 per cent have any knowledge of the existence of these facilities;
  • Labour regulations are a bigger constraint for labor intensive firms. The survey finds that labor intensive sectors that create proportionately more jobs per unit of capital investment, feel more constrained by labor related regulations.
  • Among labour-intensive the enterprises 19per cent more are likely to report that finding skilled work­ers is a major or very severe obstacle while 33 per cent more are likely to report that hiring contract labor is a major or very severe obstacle;
  • Such firms lose a greater number of days due to strikes and lockouts;
  • Report higher average time for environmental approvals and longer power shortages;
  • The experience of firms with fewer employees is different from that of larger firms. In some cases, large firms face more regulatory barriers than smaller firms;
  • Firms with more than 100 employees took significantly longer to get necessary approvals than smaller firms with less than 10 employees;
  • Large firms were also more likely to report that regulatory obstacles were a major impediment to doing business and that they incurred higher costs for getting approvals.

NITI Aayog said the Enterprise Survey was conducted in recognition of the importance of monitoring the business environment in India, adding that a follow-up document will also bring out detailed profiles of states.