DBRAP: New spirit of competitive federalism

National rankings, state level scorecards and dashboards have narrated India’s ease of doing business reform trajectory till date. These mechanisms have played a pivotal role in driving citizen attention and galvanizing government towards reform. However, the experience of seeking approvals and navigating inspections amongst entrepreneurs remains heavily localised. Given, entrepreneurs are the focal point of ease of doing business, the gap between reform intent and reform impact is vividly visible not at the state level but at the district level within a state.

This divergence amongst districts within a state highlights a structural limitation in Indian reform trajectory. Competitive federalism has been very successful in driving states compete meaningfully against each other to attract investment and drive reforms. However, it should also drive competition to districts, where an economic activity takes place. Over the last 10 years, interstate competition has acted as an important instrument to drive reform agenda. Frameworks like business reform action plan (BRAP) made states compete and align their regulations with national priorities and global benchmarks.

However, as highlighted this approach has a structural limitation. Reforms at a state level is often met with disparity at a district level. Two districts within a same state operating under an aegis of similar law may vary significantly vis a vis performance in business development. This difference may be attributed to local administrative capability, local resource capitalisation, political ecosystem, approval rate etc. For local entrepreneurs and global investors, local district level ecosystem and interface matter more than state level rankings.

Districts are an actual exhibit of governance. It is at the district level where buildings are inspected, utilities like power and water pivotal for business development are ensured and grievances vis a vis operational issues are resolved. Still, despite being an important interface between state and an enterprise, districts were not provided with the importance they deserved in business reform initiatives.

District business reform action plan (DBRAP) is an attempt to resolve this structural limitation. To give districts due attention in reform agenda, DBRAP hints at an evolution of Indian competitive federalism story. It commits to an incremental public policy reform agenda by recognising districts as individual reform hub within a state with each hub having its own challenges, capabilities and success stories. DBRAP envisions an ecosystem wherein a horizontal competition amongst districts would encourage innovation in governance practices. This ecosystem will attempt to embed reform as an everyday administration activity rather than an instruction. DBRAP thus deepens competitive federalism in an innovative way.

With all its merit in place, potential risks should not be ignored. Temptation to comply with the checklists, in a quest to have good ranking, and uneven administrative capacity across districts are a potential risk which may undermine DPRAP implementation. District administration must avoid the temptation of entering ranking fatigue mode and must preferably take this exercise as an opportunity to improvise systems and processes to act as a catalyst of business growth.

Going forward, as India pursues its ambitious goals with the tiger of Indian manufacturing ecosystem roaring louder, the quality of district level reforms under DBRAP will play a crucial role in placing India at the global manufacturing radar. In this context, DBRAP is more than a governance reform, it is an indicator of a new spirit of Indian competitive federalism. If implemented with sustained administrative efficiency and collective effort, this grassroots’ competition could elevate India’s EoDB ecosystem while balancing equity across all federal layers, thus rewriting India’s business reform story.

Dr. Arun Manhas is Director, Industries, Jammu and Mr. Tushar Gupta is a public policy professional working on governance reforms

(Views expressed are personal)