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Delhi-based think-tank calls for integrated value chain approach to speed up growth

Joe C Mathew     September 13, 2019

Delhi-based think-tank Pahle India Foundation (PIF) has advocated a new integrated value chain approach to make the government's ease of doing business (EoDB) measures more effective. In a just released study, PIF looks at three interlinked industry sectors - sugar, alcoholic beverages and tourism - to see how EoDB measures adopted by one sector can impact the fortunes of the other two.

"For example, by merely reducing the time taken to grant approvals for restaurants from nine months to three months, the state will accrue an additional revenue of Rs 38.76 crore, and the sugar millers/distillers will receive an additional revenue of Rs 51 lakh, which could potentially find its way towards payment of dues of a sugarcane cultivator," Nirupama Soundarajan of PIF says. According to her, the study makes macro and sector-specific recommendations to enable better alignment of policy reforms with the broader economic agenda of the states. "A sector-specific approach to ease of doing business will allow states to implement immediate reforms in sectors that are most crucial to their economy. The purpose of these calculations is to show that by merely reducing the amount of time for issuing licence (and the government incurs no expense in doing so0, there is a significant economic gain," she explains.

The report - An Integrated Value Chain Approach to Ease of Doing Business: A Case Study of Sugar, Alco-Bev, and Tourism - states that these three industry sectors alone provided employment to nearly 80 million people in India in 2018. It recommends an integrated sectoral approach to EoDB for more quantifiable gains in state GDP through the case study of three industries, which 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.

Launching the report in New Delhi, Amitabh Kant, CEO, Niti Aayog said PIF's recommendation is worth considering. "I find the selection of these three industries quite apt because it allows an evaluation of the division of responsibilities between Centre and states. as a federal economy, our efforts have to be aligned for scaling up EoDB in India. This would take us a step forward in making India the world's business destination."

The report recommends overhauling 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 overall revenues of states.

In 2018/19, alcoholic-beverages industry alone generated excise revenues to the tune of Rs 1.4 lakh crore for state governments.

The report also called for proactive approach in weeding out outdated laws and practices by all state governments to improve their EoDB rankings. It advocated a comprehensive trade policy that stimulates sugar exports and stricter timelines for all processes that are administered by excise departments. Inclusion of tourism in the state list was another recommendation to reflect the states' responsibility in promoting this sector.

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