Why we need reforms in states?
Because all policies are implemented at state level
What is wrong with Indian states?
- There is a high degree of heterogeneity across Indian states, creating critical barriers to investment, entrepreneurship, property rights, trade and competition.
- Various cross-state tax barriers exist, impeding the flow of goods, increasing costs unpredictably and raising the burden on businesses that move products across barriers.
- The differences in market regulation have added to varying degrees of competition across states, effectively protecting state-run enterprises
- Differences in labour laws which restricts job growth
- Differentiation between states in land records, registration and property rights remains a key bottleneck in systematically using the latent capital in land resources
- To sum up, India is yet to become single economic entity
What are the measures taken by government to handle this?
- GST: Will reduce and rationalize the various cross-state tax barriers. Rationalizing the many state and central taxes into a harmonized GST will help build a more unified domestic market
- Labour Reforms: The government is working on labour reforms at the state level, hoping to spark competition among the states to attract investment, both domestic and foreign
- Land Policy: Many states taking steps to initiate land reforms and making land more tradable.