Ease of doing business due to improvements related to borrowing approvals

New Delhi: The addition of grants of additional lending permissions to the states by the Government of India for reforms in various citizen-centric sectors has given an impetus to the states to make improvements to promote ease of doing business. 5 states have so far completed the prescribed reforms for ease of doing business.

These states have been allowed to raise additional financial resources of Rs 16,728 crore through open market lending. These states are Andhra Pradesh, Karnataka, Madhya Pradesh, Tamil Nadu, and Telangana. The state-wise amount of additional lending permissions is as follows:

State funds (in crores of rupees)
Andhra Pradesh 2,525
Karnataka 4,509
Madhya Pradesh 2,373
Tamil Nadu 4,813
Telangana 2,508

Ease of doing business is an important indicator of creating a business-friendly environment in the country. The state’s economy will develop rapidly due to the reforms made for ease of doing business. Therefore, the Government of India has decided in May 2020 to allow additional lending to the States implementing reforms for ease of doing business. The improvements included in this category are the following:

(i)) The conclusion of the first evaluation of the ‘District Level Business Improvement Action Plan’

(ii) Revocation of the requirements for registration certificate/approval / renewal of license obtained by businesses for various activities under at least the following Acts: –

Shop and Establishment Act
Contract Labor (Regulation and Abolition) Act, 1970
Factories Act, 1948
Legal metrology act
The Inter-State Migrant Workers (RE & CS) Act, 1979
Drug Manufacturing / Sales / Storage License
A business license issued by municipal corporations.

(iii) Under the Acts, the implementation of the computerized central random inspection system, in which the allocation of inspectors is done centrally. In later years this inspector is not given the responsibility of the same unit. Pre-inspection notice is provided to the practitioner, and the inspection report is uploaded within 48 hours of the inspection. This inspection includes the following:

Equal Remuneration Act, 1976
Minimum Wages Act, 1948
Shop and Establishment Act
Payment of Bonus Act, 1965
Payment of Wages Act, 1936
Payment of Gratuity Act, 1972
Contract Labor (Regulation and Abolition) Act, 1970
Factories Act, 1948
Boilers Act, 1923
The Water (Prevention and Control of Pollution) Act, 1974
The Air (Prevention and Control of Pollution) Act, 1981
The Legal Metrology Act, 2009 and Rules

In view of the need for resources to meet the challenges posed by the Kovid-19 epidemic, the Government of India on 17 May 2020 raised the lending limit of the states to 2 percent of their GSDP. Half of this special distribution was associated with the states undertaking citizen-centric reforms. Four citizen-centric areas identified for reforms are (a) one country implementation of a ration card system, (b) reforms for ease of doing business (c) urban local bodies/utility reforms, and (d) energy sector reforms.

So far 10 states have implemented one country one ration card system, 5 states have reformed for ease of doing business and 2 states have made local body reforms.

In addition to additional lending permissions, states that complete three of the four reforms are entitled to receive additional financial support under the “Financial Assistance to States for Capital Expenditure Scheme”. Under this scheme, an amount of Rs 2,000 crores has been earmarked for this purpose.

To initiate these reforms and facilitate more states to borrow more, the Department of Expenditure of the Ministry of Finance recently extended the deadline for states to complete citizen-centric reforms in various sectors. Now, if the nodal ministry’s recommendation regarding the implementation of the reform is received by 15 February 2021, the state will be eligible for the benefits associated with the reform.