Empowering India Redesigning G2B Relations

1. Empowering IndiaRedesigning G2B Relations Maharashtra

2. India’s promise is apparent to all – and IF the projections come true, we will be in a good place by 2020 India’s GDP HAS GROWN AT an average annual rate of 8% since 2001 In ppp terms, India is expected to be the 3rd largest economy by 2020 Note: Gross domestic product (GDP) at constant market prices, rebased to 2005 constant prices and translated into $ using the Rs. :$ exchange rate in 2005. Source: Economic Intelligence Unit; World bank development indicators; Euromonitor; World Economic outlook

3. But we’re significantly behind our closest competitors……. manufacturing remains a small contributor to GDP China attracts over 4 times more fdi than india Share of manufacturing has remained 13 - 16% during the past decade Note: NMCC – National Manufacturing Competitive Council Source: UN Stats; World Bank development indicators

4. …….and India ranks very poorly on ‘doing business’: 132 out of 183 countries Afghanistan 160 Russia 120 Pakistan 105 Mexico 53 China91 Israel 34 Malaysia 18 India 132 Philippines 136 Sri Lanka 89 Brazil 126 Bangladesh 122 S. Africa 35 Thailand 17 Note: Ranking based on 183 countries Source: World bank – Doing Business, 2012

5. The macro picture today is increasingly challenging…. • Large and rising fiscal deficits • Large and rising current account deficits • Stubborn, high inflation • Sliding Rupee • High cost of capital – and poor availability • Slowdown in project implementation • Etc.; Etc. Steady GDP slowdown over last 6 quarters, to > 6%

6. ….and at the Central level, we are not making it any easier for business in India • GAAR….. • Retrospective taxation • Rollback of committed contracts (telecom, etc.) • And a host of other factors… In this uncertain macro environment, investors in India are looking for help

7. The action today is shifting to the States, vs the Center Note: Growth rate of GDP is estimated at 2004-05 prices Source: Directorate of Economics Statistics of respective State Governments, and for All-India — Central Statistical Organization

8. And a few states are already driving a disproportionate share of economic activity – Maharashtra is a clear leader 9 states account for ~60% of GDP and industrial output Note: GSDP: Gross state domestic product; Industrial output comprises of the output of industrial establishments, covering mining and quarrying, manufacturing, construction, electricity, gas and water supply Source: RBI India statistics handbook; IndiaStats

9. Objectives of Empowering India • Improve India's business environment and global ranking in ease of doing business • Identify critical indicators that determine the investment climate • Review states’ performance and lessons from best practice initiatives • Work with other states to replicate best practices, thereby improving their ranking in ‘doing business’

10. We focused on 7 states, and on 12 key factors influencing the business environment in each state • 7 factors:Identifiedholistic best practices Land Acquisition & Records Property Registration Construction Permits Single Window Mechanism Industry Clusters Availability of Power Availability of Information • Universe of factors affecting business • 12 key factors identified • 3 factors:Identified strong initiatives • Labour Reforms • Payment of Taxes • Environment-related Compliances • 2 factors: No clear best practices identified • Dispute Resolution • Exit Procedures 12 FACTORS affecting business environment indentified X 7 STATES with ficci presence Source: Bain analysis

11. For every factor, we mapped where each of the 7 states stands – and also some international benchmarks International examples Land acquisition 1 InformationAvailability Japan, Korea 2 Property registration 10 Domestic best practice /initiatives (primary focus) Portugal, Egypt Singapore Gujarat Gujarat, Karnataka Obtaining Construction permits Paymentof taxes Gujarat, Maharashtra 3 9 Egypt, Denmark Azerbaijan, China Karnataka (Bengaluru) Rajasthan, Karnataka Rajasthan,Gujarat Single window clearance mechanism 4 AP Rajasthan Availability of Power 8 Singapore, HK, Mexico Brazil, France Gujarat Tamil Nadu, Gujarat Maha- rashtra Japan, China US, UK 5 7 Industrial clusters Environment related compliances Multiple countries 6 Labour reforms Source: Inputs from Primary interviews with State governments and industry; Bain analysis

12. Maharashtra: high level summary indicates strong progress in several areas, but some distance to go…. Maharashtra fares well on Information availability, Labour reforms and Industrial clusters International examples State current practice Domestic best practice Source: Inputs from Primary interviews with State governments and industry; Bain analysis

13. Maharashtra – what has worked well

14. Maharashtra – where more work is needed

15. THANK YOU!

16. Today’s agenda • The “Empowering India” initiative • Maharashtra Point of Departure • The path ahead

17. Backup

18. Labour reforms: Outdated laws and inadequate quality of labour trouble industry Common pain-points Key gaps Industry perspectives Source: Inputs from Primary interviews with State governments and industry; Bain analysis

19. Labour reforms: Maharashtra’s labour management system has been effective in reducing complexity Salient features ‘Mahashramm’ helps boost transparency and simplicity of processes for both labour and industry Source: Inputs from Primary interviews with State governments and industry; Bain analysis

20. Labour reformsRecommendations to sharpen the current system Policy framework • Revise labour laws and consolidate into one, simple act • Introduce exemptions and simplifications for high priority industries • Periodically review labour management system for updated practices • Consider complaint-based vs. mandatory system of inspections • Establish linkages between workers, banks and industry for easier and greater inclusion • Create blueprint for industry-led skill development programme • Privatize ITIs to ensure quality training • Incorporate constant industry and candidate feedback to update training Improvements in procedure Criticalenablers • Leverage public private partnerships to improve linkages between workers and industry, boost quality of manpower and ease procedures for industry • User friendly e-portals as information portals and interface between stakeholders • Simplify labour compliance processes and dispute resolution • Encourage self-certification through documented user manuals • Establish grievance redressal cell to resolves disputes and issues • Institute reforms committee to review and simplify existing labour laws • Track progress of labour management system, fix accountabilities and track performance • Invest in upgrading ITIs, and fix responsibilities on officers for performance Implementation discipline Source: Inputs from Primary interviews with State governments and industry; Bain analysis

21. Construction permits: Large number of regulations and departments involved make the process complex Common pain-points Key gaps Industry perspectives Source: Inputs from Primary interviews with State governments and industry; Bain analysis

22. Construction permits: Easing of processes in Mumbai area and MIDC estates, but still complex outside Features With the exception of a few areas, builders need to follow up with multiple bodies for NOCs Source: Inputs from Primary interviews with State governments and industry; Bain analysis

23. Construction permitsRecommendations for the model state • Revise construction laws every 2-3 years to remove outdated criteria • Involve stakeholders: Industry, urban authority, experts, PCB officials, public • Set mandate for single window and online processes at state level Policy framework • Prepare blueprints for simplification of procedures • Establish task force to implement single window • Mandate time limits for approval processes by all departments, enabled by penalties • Prepare implementation plan and procedures for digitization of plan submission and approvals Improvements in procedure Criticalenablers • Unambiguous definition of various bye-laws is essential to digitize scrutiny • Coordination between departments is necessary for effective single window system • Selection of an experienced technology partner to transition systems online Implementation discipline • Draft plan for state-wide transition of procedures online • Define time-bound implementation plan to take processes online and roll out to public • Enforce accountabilities by fixing responsibilities and track progress • Create a municipal policy reform body to periodically update construction norms • Track effectiveness trough user-feedback • Create time-bound redressal cell to address implementation gaps and complaints Source: Inputs from Primary interviews with State governments and industry; Bain analysis

24. Single Window Clearance: Currently, there is lack of consistent implementation in the Single Windows that exist Common pain-points Key gaps Industry perspectives Source: Inputs from Primary interviews with State governments and industry; Bain analysis

25. Single Window Clearance : MIDC has a system in place which could improve in scope and coverage Features ‘Maha-Ebiz’ single window system in MIDC areas still need improvements across the board Source: Inputs from Primary interviews with State governments and industry; Bain analysis

26. Single Window Clearance Recommendations for the model state • Pass Single Window Act to empower nodal agency and encourage efficient approvals • Include coverage of companies of all sizes, and ensure time-bound action by fixing accountabilities and penalties Policy framework Improvements in procedure • Simplify application process by introducing Common Application Form • Include all departments such as land, environment, construction permits, utilities • Constitute single window committee to oversee the processes • Enforce time-bound approvals through ‘deemed clearances’ and statutory time limits Criticalenablers • Coordination between different departments is essential for a single window system • IT training and computer literacy enable easy implementation • Online information portal with all required details and procedures • Empower nodal agency to assign and enforce accountabilities • Fix responsibilities on individuals; track and monitor effectiveness through periodic meetings • Impose penalties on departments/individuals for delays; link to annual appraisal • Ensure consensus, transparency and accountability among departments to provide single, unified face to investors • Build user feedback and redressal and resolution mechanisms to track performance of nodal agency • Ensure publicity through marketing and transparency through continuously updated information portals Implementation discipline Source: Inputs from Primary interviews with State governments and industry; Bain analysis