Ease of Learning About Doing Business in Indian States

October 23, 2020

By Arjun Mehrotra

The international business community often looks to New Delhi to understand foreign direct investment (FDI) rules and gauge the openness of the Indian economy. While the central government formulates FDI policy and provides broad direction to states, many of the day-to-day realities of investing and operating in India are defined at the state level. CSIS’s Ease of Learning About Doing Business Index (EoLDB) tracks how easy Indian states make it for potential investors to learn about investment opportunities in their state.

The EoLDB index considers sixteen factors to measure how easy it is for investors to find information from the states’ websites to decide if they want to invest in that state. Each factor has a score of 0 if the factor is absent, 0.5 if partially present, and 1 if entirely present – these scores are then added to form the sixteen-point index. The sixteen factors are divided evenly among four groups, with equal weightage to each group. The four groups include:

• Ease in finding relevant website (prominence in search results, dedicated investment portal, mobile-friendly website, and social media presence)
• Ability to quickly find appropriate contact person(s) (clear first point of contact, names of officials, appropriate contact details, and dedicated country desks)
• Ability to find relevant details (description of investment processes, incentives, industrial policy, and overall value proposition of the state)
• Other factors - language friendliness (whether the site can be accessed in English and foreign languages) and comprehensiveness (whether links work and connect to other pertinent state and central government information sources).

A good score on the index does not definitively imply that the actual process of getting approvals will be easier or that the business environment is necessarily better than lower-ranked states. Nonetheless, such a ranking is useful as potential investors and other state governments can see what efforts states have made to attract investment.

Karnataka and Madhya Pradesh top CSIS’s EoLDB index. Out of the thirty-four states and union territories surveyed, thirteen have dedicated investment promotion portals, seven have investment pages on their state Department of Commerce and Industry (DC&I) or Industrial Development Corporation (IDC) websites or their equivalent, eight have self-described single-window clearance portals, and six have just the standard state DC&I website.

While many portals feature prominently in search results, some are surprisingly hard to find. For instance, Gujarat’s top-notch Industrial Extension Bureau (iNDEXTb) does not mention the word “Gujarat” in the title. An investor without prior knowledge of iNDEXTb might only find it through the Invest India portal. In other cases, an investor must specifically search for the state DC&I website. For most states, the relevant Invest India state page or India Investment Grid state page appears among the top search results. Non-government websites like Invest in India and FDI India also appear in the results.

Some states (Punjab, Jharkhand, Tripura, and Andhra Pradesh) have well-designed websites but two different portals – this can confuse an investor looking for precise information from a single reliable source. Some states (West Bengal and Himachal Pradesh) have comprehensive websites from large investors’ summits they have previously hosted and can benefit from integrating these websites with their investment portals. Nonetheless, information on industrial policy and relevant officials is generally available within one or two clicks from the main pages of the state portals. The best portals have a specific email address or contact number for general queries and the names and email addresses of relevant officials for more high-level conversations.

While some variation between EoLDB and Department for Promotion of Industry and Internal Trade’s Ease of Doing Business (EoDB) Index (2019) for Indian states is unsurprising, there are some notable differences – Delhi ranks last on EoLDB  (17) but does much better (12 out of 29) on the EoDB index while Odisha comes second on EoLDB  but last (29 out of 29) on the EoDB index. Even between the top states on CSIS’s EoLDB index, Madhya Pradesh has a substantially better EoDB ranking (4th) than Karnataka (17th).

Best practices from state investment portals:

• Dedicated pages for overseas diaspora, such as Tamil Nadu’s Yaadhum Oorae portal
• Dedicated websites or sections of existing websites to promote specific industries, including Tripura Bamboo Mission and the IT sector in Meghalaya
• Offices in major Indian cities to increase access to potential investors - Invest Bihar in Mumbai and Invest MP in Delhi
• Key documents in relevant foreign languages– Tamil Nadu has a Mandarin slide deck for investors from Taiwan and Gujarat has copies of its latest 2020 industrial policy in Dutch, French, German, Japanese, Korean, Spanish, and Mandarin
• Dedicated country desks and people assigned to work with investors from those countries (Gujarat, Karnataka, and Tamil Nadu)
• Details of both general and sector-specific land banks for industry (Telangana)
• Mobile application (app) to track progress on the necessary permits and paperwork, like the Nivesh Mitra app (for Android users) in Uttar Pradesh
• Mention of Covid-19 response guidelines (Maharashtra and Nagaland) and public safety precautions (Odisha)

States that better position themselves to investors stand a better chance of attracting investment in a changing geopolitical and economic environment. Although many states still need to make policy changes to improve their business environments to attract investment, making information about investing in the state more accessible to investors is a step in the right direction.

Arjun Mehrotra is an intern with the Wadhwani Chair in U.S.-India Policy Studies.