India has achieved sustained high GDP growth rates without much help from the manufacturing sector. However, in recent years growth has faltered. This, combined with the additional challenge of creating adequate jobs for the large number of persons expected to enter the workforce, has brought to the fore the need for fresh reforms to bring the country back on its growth trajectory. With the final objective of providing a fillip to growth, governments and policymakers have launched a number of programmes and undertaken regulatory reforms to give an impetus to manufacturing.
State governments too have initiated a number of reforms in areas such as labour laws and environmental regulations, and in processes for granting permits and clearances in order to lower barriers to entry, attract private investments, and boost manufacturing. It is expected that central and state government regulatory reforms will result improve the ease of doing business for firms in the manufacturing sector. The underlying assumption here is that it is not lack of skill or entrepreneurial talent but regulatory barriers that are the major impediment to manufacturing firms in the country.
The NITI Aayog-IDFC Institute Enterprise Survey covers approximately 3200 manufacturing firms, including manufacturing start-ups, in order to assess the business regulatory environment in states. The survey focuses on 9 areas of doing business viz. starting a business, land and construction related permits, environmental permits, labour regulations, infrastructure related utilities like electricity, water and sewerage, taxes and customs, legal issues, access to finance, and exiting a business. Firms are asked whether they have completed compliance processes online, the time taken to complete processes, and the severity of obstacles they face in each of these areas. In addition, the survey also covers industry associations and experts to know their views regarding the business regulatory environment in states.