The World Bank in a report that ranks Indian states in an effort to encourage them to cut red tape, said that Gujarat, the state Prime Minister Narendra Modi ran for more than a decade, is India's best place for conducting business.
The report, prepared with support from KPMG on the request of the Modi government, gains importance by coming before the World Bank's annual Doing Business report, which ranks nations and is expected to be released next month.
Since taking charge in May 2014, Modi has set an ambitious target of improving by 2017 India's national ranking from a woeful 142 of 189, below Pakistan and Iran, to the top 50.
Last year, India slipped two spots in the report, and was ranked lower than Brazil, Russia, China and South Africa - mainly because of delays in approvals for starting a business, tax payments, getting bank loans and property registration.
"The growth of business in India requires concerted action on several fronts - infrastructure, capital markets, trade facilitation and skills," said Onno Ruhl, the World Bank's India director. "The stark reality is that India remains a difficult place to do business."
The report suggested that such steps as offering single-window clearances for administrative approvals, if followed by all states, could improve India's global ranking. It said that states - including the top five, Gujarat, Andhra Pradesh, Jharkhand, Chhattisgarh and Madhya Pradesh - had implemented reforms in online tax payments, construction, permits, electricity connections and environmental clearances in a specified time.
However, the states should set up electronic courts, and reforms relating to labour laws, land allotment and property registrations, the report said.
"This is a defining moment for Rajasthan because improving our ease of doing business directly accelerates job creation for our youth," said Vasundhara Raje, the chief minister of Rajasthan. The state was ranked sixth among 29 states.
Modi's government has taken several pro-business steps, such as rolling back plans to tax foreign companies and allowing them to invest more in insurance, defence, banks and other sectors. However, India's decision to drop a plan for a goods and service tax because it lacks political support, and to roll back business-friendly amendments in the land bill, have annoyed many domestic and foreign investors.
Projected to grow at more than 7.5 per cent in the 2015/16 fiscal year, India sees an opportunity to attract more investments, especially with economic growth slowing in China. Total foreign direct investment inflows into Asia's third largest economy touched $44.3 billion in the 2014/15 fiscal year ending March, up 23 per cent compared with the previous year, data on Ministry of Commerce and Industry website showed.
