While Finance Minister Arun Jaitley has said that the 12-notch jump for India in the World Bank’s ‘Doing Business’ rankings should have been better because it doesn’t reflect some of the recent steps including changes in the Arbitration Law. The Vice-Chairman of NITI Aayog, Arvind Panagariya, says that the improvement in rankings is an understatement since it does not capture recent reforms done by states across India. Panagariya tells Santosh Tiwari that the Tamil Nadu model of land acquisition law changes is expected to become a template for other states. Excerpts:
Q: The improvement in World Bank rankings has come as a big boost for the NDA government, but there is a feeling that the improved ranking doesn’t capture the government efforts fully. States such as Gujarat, Rajasthan, Andhra Pradesh and a few others are reforming their laws to improve the business environment. How do you see all this?
I am happy that we have achieved this big jump in the Doing Business rankings. However, I think it still understates where India should be because a lot of improvements have come after the World Bank had actually collected their data. So, I expect the rankings to rise further in the next round. It should also rise if they collect data from the states. Right now, they collect their data from Mumbai and Delhi; but we have our own ranking system within the country and across states, and the states that lead are Gujarat, Andhra Pradesh and some of the smaller states. Maharashtra (Mumbai), where they collected data, comes a little later, and Delhi actually ranks quite low in our rankings. And yet the World Bank is collecting data only from Delhi and Mumbai. That is another source of understatement of our rankings. So, I think that once the full effect of our changes gets incorporated in what the World Bank does, India will rise quite a bit further. If the World Bank does it right, by looking at our best states like Gujarat and Andhra Pradesh, then we will do even better.
Q: The NDA government is trying to bring states into the reform mode in areas that impact the ease of doing business, such as labour and land acquisition. How do you think the states would be contributing towards the ease of doing business scenario, going ahead?
This is very important as the change ultimately has to be effected by the states. The Centre has been providing a roadmap but the states have to take actions. We can see that some of the states have taken more actions, and some of them have taken less, which is why we see the differences in their rankings—so the role of the states not in the ease of doing business but also in economic reforms is extremely important because many of our remaining reforms are either on the state list of the Constitution or on the concurrent list, and both these are the areas where states can take initiatives. Even on land acquisition, Tamil Nadu has taken the initiative and has done an excellent reform of the 2013 Land Acquisition Act.
Q: What exactly has Tamil Nadu done which can ensure changes like the ones proposed in the NDA’s Land Acquisition Act?
Tamil Nadu has introduced a provision by which they have inserted a schedule—it is called fifth schedule in the 2013 Act—and what the amendment does is it allows Tamil Nadu to list any Acts in the fifth schedule that are exempt from the 2013 Act. This means that if they feel there is any area where the 2013 Act is highly restrictive, they can actually get an exception by listing the relevant legislation in the fifth schedule.
Q: Which also means that this can be a model for other states to follow…
Yes. I have been arguing for this and it is certainly a very neat and clean model. There are other ways also in terms of notification of rules within the Act as it exists. You could try to shorten the social impact assessment (SIA) time periods and all.
Q: What about Rajasthan? The state has been trying to amend its Land Acquisition Law on the lines of the NDA’s Bill…
Rajasthan is waiting for the assembly to approve its amended Land Act. They were originally considering amendments to the 2013 Act but the Ordinance had come in. But as the central government now is not pushing the legislation, the states are taking the lead.
Q: Another important area is labour law reforms. The Centre is trying to change central labour laws and states are trying to amend their own ones to improve the ease of doing business. It will depend on a large extend to how we change our hire-and-fire norms and also entry and exit rules for the companies. How is this process going on?
Right now the way this is moving is that we are trying to work on multiple tracks. States are carrying out labour law reforms and the central government is supporting these reforms. The Centre itself is considering some reforms. In some cases, it is changing the legislations that currently exist, but there is also a larger exercise that the government is considering, which Prime Minister Narendra Modi himself announced in his Independence Day speech—that there are 44 central laws they are trying to unify into four codes, and in the process of formulating those codes they will also try to clean up lot of confusion that exists in the current laws.
Q: NITI Aayog was to come out with the reports to support skill development and start-ups. What have you suggested the government here?
There are three reports by the sub-groups of chief ministers as part of Prime Minister’s cooperative federalism drive—on Swachh Bharat, Skill Development, and Centrally Sponsored Schemes—and then the Budget FY16 had given mandate to the NITI Aayog to take lead on entrepreneurship and innovation. As part of that exercise, we had appointed a committee on innovation under Prof Tarun Khanna of the Harvard Business School and they have just submitted the report to us. That report tries to lay down the roadmap for how the NITI Aayog can proceed to give a fillip to both innovation and entrepreneurship in start-ups and also in areas like incubation.
Q: NITI Aayog is also doing an evaluation of the Aadhaar-use-in-PDS with some of the Union Territories starting this. Do you think that could be a model which ultimately would get extended throughout the country?
We will see. This is a new kind of experiment that we are carrying out, where we are trying to bring in state-of-the-art analysis on what the government is doing in terms of evaluation. In this case, we have taken the Abdul Latif Jameel Poverty Action Lab (J-PAL) of the Massachusetts Institute of Technology as our partner. We now have to see how this experiment progresses