States follow Modi’s Atmanirbhar vision. Andhra, Gujarat’s new industrial policies show
The states spent another quarter battling Covid-19 while steadily resuming economic activity. A flailing economy pushed the states to ease containment measures while bolstering policy support. In the face of a worsening pandemic in the third quarter, the states continued to prioritise policies that reflect and encourage ease of doing business, new jobs, and empowering local entrepreneurs. Five states relaxed land acquisition norms, four empowered employers to hire and fire, and four introduced new industrial policies. As evident, supply-side improvement remained a crucial element of the recovery strategy.
Announcement on land and labour reforms was a recurring theme with states this year. In the third quarter, states introduced measures that allowed transfer of land in favor of industry. Gujarat, Telangana, and Uttar Pradesh were among the five states that permitted purchase of agricultural land for industrial purposes. Labour reforms in Arunachal Pradesh, Karnataka, and Punjab supported fixed-term employment in industrial establishments. Telangana approved Bills that allowed for digitisation of land records.
Yielding to the Narendra Modi government’s Aatmanirbhar Bharat vision, states unveiled a range of policies to attract investors looking for alternate manufacturing destinations as global supply chains shift. Andhra Pradesh, Gujarat, and Karnataka approved new industrial policies. Three states unveiled a new policy and an incentive package for manufacturing electronics. Uttar Pradesh aimed to set up 100 incubators. India’s informal sector, especially small and medium scale manufacturing, was hit hard by business closures and restrictions on movement in the first half of the year. To revive business sentiment, Gujarat and Uttar Pradesh announced policies to encourage small and medium industries. Rajasthan focused on structural reform and turned to establishing a one stop shop for fast-tracking investments into the state.
Green and digital transition was high on the agenda for boosting the resilience of the state’s economy. Karnataka and Tamil Nadu announced information technology policies. Delhi, Gujarat and Telangana announced a range of incentives for electric vehicles. While Haryana mandated emission monitoring for water-polluting industries, Lucknow mandated solar rooftops for upcoming housing and commercial units. In noteworthy moves, Himachal Pradesh reduced tariff subsidies for domestic electricity consumers, and Maharashtra committed to building no new coal plants.
The quarter also saw a surge in protectionist policy measures. Madhya Pradesh and Haryana decided to reserve jobs for local candidates. In a bid to protect the state’s power distribution companies, Rajasthan restricted large consumers from buying power from the open market. Telangana passed a legislation against the pending Electricity Amendment Bill, 2020. The Bill offers the opportunity to revive the distressed electricity distribution sector, pressing state utilities to honor contracts and gives the central government a growing role in deciding tariffs.
States are at the forefront of the negative socio-economic consequences of Covid-19. Uncertainties around the pandemic will continue to impair the already precarious financial position of the states. While with the policy response, states have signaled an intent to act, their capacity for action will be limited without the central government’s assistance. A proactive federal role in state’s recovery is thus essential for a sustainable and inclusive growth. The Central government’s investment in a robust Center-state cooperation may help the states tide over the sternest tests that lie ahead of them.
Key reforms that the Centre for Strategic and International Studies (CSIS) tracked in last quarter include:
Industrial policy and business regulation
· Karnataka clears its New Industrial Policy 2020-25.
· Andhra Pradesh unveils its new industrial policy.
· Gujarat announces its Industrial Policy, 2020.
· Uttar Pradesh approves a startup policy to set up 100 incubators in the state.
· Uttar Pradesh cabinet allows micro, small, and medium enterprises to start operations within 72 hours of receiving their application.
· Rajasthan establishes a one stop shop for fast tracking investments into the state.
Land and labour regulations
· Gujarat allows industrial units with 300 or less employees to “hire and fire” their employees.
· Arunachal Pradesh allows self-certification under 12 labor laws.
· Gujarat allows purchase of agricultural land for setting up educational institutions.
· Assam allows purchase of land for setting up industries.
· Jammu and Kashmir approves transfer of land for establishing industrial estates.
· Uttar Pradesh eases land transfer for setting up warehousing and logistics units.
· Telangana approves Bills to allow digitisation of the land records and transactions.
· Andhra Pradesh approves three capitals for the state.
· Delhi mandates parking space reservation of up to 20 per cent for electric vehicles (EV).
· Gujarat announces a subsidy scheme for electric two-and three wheelers.
· Telangana approves a policy to promote the usage of EVs.
· Uttar Pradesh mandates solar rooftops for upcoming houses and commercial units.
· Himachal Pradesh reduces tariff subsidies for domestic electricity consumers.
· Maharashtra commits to building no new coal plants.
· Haryana mandates emission monitoring for water-polluting industries.
Business Negative Reform
· Rajasthan restricts large consumers from buying power from the open market.
· Madhya Pradesh reserves all state government jobs for the state’s domicile population.
· Telangana passes a resolution against the new Electricity (Amendment) Bill, 2020.