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An Integrated sectoral Value Chain Approach to Ease of Doing Business can help improve GDP of UP

  • Report on ‘Ease of Doing Business’ (EoDB) points out that integrated value chain approach to EoDB will lead to more quantifiable gains and higher contribution of the business sectors to state GDPs
  • It examines these three industries as case studies which are integrated to show how inter-linkages have to be taken into account while implementing reforms in industries
  • India’s rank on EoDB framework has improved from 130 in 2017 to 63 in 2019
  • The state of UP has seen its rank in EoDB slip from 10 in 2014-15 to 14 in 2016-17 to again rise to 12 in 2017-18

Lucknow, 20 December 2019:Pahle India Foundation (PIF) – an FCRA certified, not-for-profit policy think-tank – in its latest report titled “An Integrated Value Chain Approach to Ease of Doing Business: A Case Study of Sugar, Alcohol-Bev, and Tourism” has pointed out that these three industry sectors under study together provided employment to nearly 80 million people in India in 2018.

The report recommends an integrated sectoral approach to EoDB for more quantifiable gains in state GDP.  It examines three industries as case studies, viz. sugar, alcoholic beverage, and tourism, to show how a small reform in one of these sectors can create cumulative economic impact across the value chain and for the state because of their inter-linkages.

The report recommends overhauling of state Excise practices, including moving from offline systems to online, along with several other policy measures for improving Ease of Doing Business (EoDB) and GDPs of states. 

It also stresses the need for the current EoDB framework to incentivise states to comprehensively overhaul those state legislations, such as the Excise Act, that hamper ease of doing business, and therefore growth. Tax revenues from Excise form a significant part of the states’ annual revenue receipts. In 2018-19, alcoholic-beverages industry alone generated Excise revenues to the tune of INR 1.4 lakh crores for state governments
According to the report a State-wise framework has seen an overall improvement in the EoDB rankings but has not helped in improving GDP at State levels. Among others, a lag between implementation and the impact it creates and the fact that overall reforms do not necessarily mean ease of doing business in sectors are reasons for this disconnect between EoDB and growth in State GDPs.

The reason for the selection of the three sectors were the inter-linkages between each of these. While, Sugar is an input sector for Alco-Bev, Tourism is the output sector. Sugar is centrally regulated, Alco-Bev is regulated by States, and Tourism by both. But a very important point is that these sectors also  represent agriculture, manufacturing, and services respectively.

In the current EoDB framework India’s rank has gone up from 130In 2017 to 63 in 2019. As per Amitabh Kant, CEO NITI Aayog, India’s goal is to be within top 50 in the next two years and within top 25 in the next five years.

The state of UP has seen its rank in EoDB slip from 10 in 2014-15 to 14 in 2016-17 to again rise to 12 in 2017-18. Though the ranking has recovered, it has not improved significantly. As per business feedback, Uttar Pradesh ranks 10, which is slightly better than the overall ranking. On the reform implementation ranking the state stands at 14, which is lower than overall ranking. Uttar Pradesh has third largest GSDP, but its rate of growth has slowed down from INR 7,24,049 crores (2013-14) to INR 11,37,210 crores (2017-18) and INR 12,50,213 crores (2018-19).

Commenting on the study, Ms. NirupamaSoundarajan of Pahle India Foundation, said: “The Indian economy has slowed down and there is a need for targeted policy measures to stimulate growth. For reaching the goal of five trillion economy and placing it within top 25 in EoDB, competitive federalism is important. Digitisation is a key element and transparency and ease in doing business very critical:.
The state of Uttar Pradesh has carried out a lot of reforms in these sectors and that is visible in many ways. First, for the sugarcane and sugar sector it is evident from the remarkable increase in cane acerage and recovery rates indicating a positive sentiment among farmers. Second, for businesses in the alco-bev sector and for sugar millers alike, the increase in number of distilleries has been a welcome move. Lastly, in order to increase the contribution of hospitality and tourism to state revenues there has been focus on increasing fine dining licenses to attract more foreign tourists” said Mr Sanjay R Bhoosreddy - Principal Secretary to Government of UP

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