COMPARING STATE-LEVEL

POLICY RESPONSES TO
ECONOMIC REFORMS IN INDIA

Subhadeep Barkataki I007

Roopsa Pal I015
Nirali Shah I036
Rahul Seth I039
Karan Magnani I049
Prerak Shah I059
 INTRODUCTION
• States have responded to economic reforms

• Considerable variation across states

• Economic development strategies in relation to central state

• India's reform process and the changes brought about

• Distinct economic and social situations unique subnational

political economies
 LIBERALIZATION IMPACT ON INDIA

• Early 1990s, adopted structural adjustment programme

• Centralized management of the economy- scarce capital directed to

priority sectors

• State governments not directly influence national industrial policy

• In1991, major changes in monetary, trade and industrial policies

• Reducing direct involvement of state - financial relations between the

union and the states impact
 ECONOMIC GROWTH AND REGIONAL INEQUALITIES

• 1950 to 1980, india grew at roughly 3.5% per year

•  1980s onwards, growth rates registered a gradual acceleration (5.5% per

year)

• 2000s, higher rates for several years - 8% or more, decelerating after 2009
(6.8%)

• Reforms of the 1990s to improve the functioning of markets and extend

reach
DETERMINANTS OF GROWTH IN INDIAN STATES

• Private investments major driving force of1990s

• Literacy and education explanatory variables for inter-state inequalities

• Dismantling of license-permit raj, states direct competition for private

investments
 ANDHRA PRADESH
Land Area Population
160,205 km² 5.39 crore

Per Capita GSDP Literacy Rate

Rs 1,69,519 67.4%

Unemployment
4.5%

Census of India, 2011

Centre for Monitoring Indian Economy
Global Data Lab
• One of the first States to openly embrace liberalization agenda

• Devised a growth plan with the help of McKinsey

• McKinsey developed a “Vision 2020”

• Strong will to improve the investment climate in 1995

• Special focus was on the metropolitan region of Hyderabad

• Actions were undertaken to beautify the city, improve road traffic, digitalize
many government services (including utilities), and reform municipal finance

• Media campaigns to garner public support and attract the attention of investors,
including FDI
• The strategy started seeing success in the IT sector

• Extensive investments in infrastructure specially

designed for the information technology industry

• A special IT policy in 1999

• Andhra pradesh became the first sub-national state

in the world to directly negotiate a loan from the world
bank Business Reform Action Plan : DIPP Assessment 2017

• It is the first state in the country to have enacted the

industrial single window clearance. The act made it
compulsory for new industries to register with a
single-window to obtain clearances quickly.

• Aggressively marketed the state as ‘pro-business’

 Policy Highlights
ICT Policy of Andhra Pradesh
• Infrastructural investment designed for IT industry
• IT Policy implemented in 1999 and then in 2002 and then in
2005
• Incentives like 24 hour electricity connection, exemption
from zoning regulation, exemption from inspections under
most labour laws for self certification, rebate on cost of land
etc
Industrial Development Policy 2015-20
• To ensure sustainable & inclusive industrial growth.
• To be among the Top 3 states in terms of industrial
investments by 2022 and be the most preferred logistics hub
and India’s gateway to East and Southeast Asia by 2029.
• To enhance the quantum and quality of skilled manpower and
create significant employment opportunities

Textile, Apparel and Garments Policy 2018- 23

• To create an environment for investment
• To attract new investments in value added textile activities
worth Rs 15,000 crore (US$ 2.24 billion) by 2023.
• To convert the major portion of yarn produced in the state
into fabric and garment’s within the state
IBEF
 Andhra Pradesh Single Desk Policy 2015-20
• To create a conducive ecosystem to provide all clearances
required to setup industry within 21 working days.
• To provide spot and deemed approvals based on self-
certification and to provide parallel processing of
streamlined processes.

Innovation & Start-up Policy 2014-2020

To create a world-class ‘technology startup ecosystem’ by

fostering ‘entrepreneurship and a culture of innovation’ which
contributes to increased knowledge, wealth and employment in
our society

Designated Technology Parks (DTP) Policy, 2017-2020

• To incentivize real estate developers to build larger world
class Information Technology (IT) office spaces.
• To reduce the approval time for office spaces for IT
companies from 50 days to 21 days.
IBEF
 STATE-LEVEL STRUCTURAL REFORMS
• IN 2002, ANDHRA PRADESH BORROWED MONEY ON LARGER SCALE FROM INTERNATIONAL DONORS

• PREVIOUS GOVERNMENTS CREATED HUGE BUDGET DEFICITS MAINLY DUE TO FOOD SUBSIDIES

• TO EMBRACE STRUCTURAL REFORMS, IT TOOK FEW STEPS TO THE ADDRESS THE ISSUES:

• REDUCING THE SUBSIDY FOR RICE

• DISCONTINUING FREE SUPPLY OF ELECTRICITY TO FARMERS.

• RESTRUCTURING THE GOVERNMENT, ITS SIZE AND ITS MODE OF INTERFACE WITH THE PUBLIC

• FREEZE ON HIRING IN THE PUBLIC SECTOR

• MANY SERVICES WERE DELEGATED TO PRIVATE COMPANIES OR, IN THE HEALTH SECTOR, TO NGOS

• GREATER SHARE OF THE COST OF UTILITIES (ENERGY, WATER, WASTE COLLECTION ) WAS TRANSFERRED TO

CONSUMERS

• CLOSURE OF LOSS-MAKING COOPERATIVE SOCIETIES

• PRIVATIZATION OF SOME PUBLIC ENTERPRISES

 Economic Growth Vision

Increase GSDP per capita to Rs. 5.07 lakhs by 2029-30

Achieve 12% annual GSDP growth till 2029-30

ODISH Land Area Population
155,707 km² 47,645,822
A 4.74%

GSDP Literacy Rate

Rs. 5.31 trillion 72.87 %
12.77% India – 74.04%

Unemployment Largest share

2.97% (47.5%) of
India – 6.5% mineral
production (by
value)
• In Orissa, the budget deficit in the late 1990s was critical,
around 30% of net output

• 1999, Memorandum of Understanding between the Orissa

Government and the central government for reducing
expenditures and increasing revenues

• In 2005, the Government of Orissa adopted its own Fiscal

Responsibility and Budget Management Act

• Restructuring its debt, aimed to increase State revenues,

introduction of VAT (in 2005), hike in the amount of
royalties charged on the mining and metallurgy industry. A
freeze was on salaries and new recruitment of civil servants,
steps taken to privatize public enterprises

• A focus on the industrial sector and to some extent the

service sector effectively ignores three quarters of the
population, which depend on agriculture and related
activities.

• A small political elite, composed of high castes representing

less than 8% of the population, dominate political life.
• Absence of mobilization among marginalized groups has
made it easier for the government to conduct its policy of
attracting industrial investors to tap mineral deposits,
including on tribal land, which often involves the
displacement of villages

• The Orissa government’s main objective has been to

promote its remarkable endowment in mineral resources by
attracting investors (Indian and foreign)

• Simplification of administrative procedures, tax incentives

and improvement of certain infrastructures. 2007 new
industrial policy

• The establishment of “Team Orissa” symbolizes the

government’s commitment to attract entrepreneurs

• Corruption is perceived as a problem

• Significant geographical and social disparities exist

• Significant shift in the 2000s from a tradition of public

sector-led development to greater reliance on the private
sector
Policies
Excise Policy 2018 :
Adopt excise duty, fee structure and guidelines for the
settlement of excise shops and establishments
Renewable Energy Policy 2016:
Create an environment conducive to
public/private/community participation, research and
development (R&D) and investment in renewable energy.
Odisha Start-up Policy 2016:
Create an environment conducive to
public/private/community participation and investments in
renewable energy
Export Policy 2017:
Provide necessary support to exporting industries with the
aim of providing a boost to exports.

Odisha Tourism Policy 2016 : Industrial Policy Resolution

Key Industries:
Promote sustainable tourism with a view to create (IPR) 2015:
Iron, steel, ferroalloy, aluminium,
employment opportunities and to bring about socio- Attract investment and
handloom, mining, IT and ITeS,
economic benefits to the community. promote economic growth in
electronics and tourism
the state of Odisha.
IBEF
Mineral & Metal based Industries:
In 2019-20, Odisha contributed the largest share (47.5%) of
mineral production (by value) in India. Value of minerals
produced in the state reached Rs. 299.17 billion in 2019-2.

Power Sector:
As of November 2020, Odisha accounted for a total installed
power generation capacity of 8,592.20 MW, comprising
3,828.22 MW under state utilities, 2,797.02 MW under the
private sector and 1,966.98 MW under central utilities

FDI Investment:
The state attracted Foreign Direct Investment (FDI) inflow
worth US$ 616 million between April 2000 and September
2020 according to the data released by the Department for
Promotion of Industry and Internal Trade (DPIIT)

Tourism:
About 153.07 lakh domestic tourists and 1.15 lakh foreign tourists
visited Odisha in 2019-20
Start-Up:
Odisha Cabinet approved the Odisha start-up policy, aimed at
setting up at least 1,000 start-ups over the next five years and
bringing the state among the top three start-up hubs by 2020 IBEF
Healthcare:
In December 2019, the State Government announced
increasing bed capacity in major hospitals including Mother
and Child Healthcare Center (MCH)

Manufacturing:
In order to increase employment opportunities in the state,
Odisha Government announced plans to invest US$ 28.69
billion in the manufacturing sector to generate nearly three
lakh job opportunities by 2020

In December 2020, the Ministry of Port, Shipping, and

Waterways agreed to the Odisha government’s proposal
for the riverine port to be developed by the Paradip Port
Trust at an investment of Rs. 4,000 crore. The project is
estimated to generate employment for 6,000 people.

In October 2020, the state government launched 12 different

industrial projects with a combined investment of Rs. 8,796.61
crore.
The projects include 8 MSME and 4 large projects in sectors such
as health care, renewable energy, steel, IT, cement, and food
processing. These 12 industrial units will generate employment
opportunities for 7,090 people in the state IBEF
Odisha government’s portal GO SWIFT, the Single Window Investor Facilitation and Tracking has won the National
e-Governance Silver award for the year 2019-20
KERALA Land Area Population
38,863 km² 33.41 million

GSDP Literacy Rate

Rs. 8.75 trillion 93.91%

Unemployment 5.5% HDI - 0.779

India – 6.8% Highest in India
• Kerala has experienced substantial social development reasons
being high level of political consciousness and mobilization of
population
• However, there is lack of private investment and economic growth
• The growth model of Kerala sustained primarily due to socialistic
viewpoint of the ruling party
• The socialistic policies under the influence of communist party
have successfully led to income redistribution due to presence of
powerful trade unions
• Problems
• Large scale immigrations
• Economic dependency on remittances from migrants
• Gaps between attitude if senior politicians and public servants
in charge of implementation
• Difference in central and local government ideology
• Asserting autonomous policies by successive govts leading to
large deficits
• Fierce competition from other states for industrial
development
• In response to these problems, government took initiatives like
setting up the KSIDC, changed the attitude towards private players
due to change in socio-economic development
• Due to these measures, the state has managed to grow despite the
structural challenges
Policies
Education
• Kerala has allocated 14.6% of its expenditure on
education in 2020-21
• Rs 927 crore has been allocated towards Sarva Shiksha
Abhiyan
• An amount of Rs 529 crore has been sanctioned for the
Mid-Day Meal Scheme

Kerala Agricultural Development Policy 2015

• The farmlands are to be protected and should not be
put for any other use than farming activities
• The agriculturally potential land is to be identified and
demarcated using modern technologies and a database
is to be made

Kerala Tourism Policy 2012

• To create an environment for investment
• To market Kerala as a visible global brand in domestic and
international markets.
• To ensure quality visitor experience
Health and Family Welfare
• Rs 2,440 crore has been allocated for urban health
services and Rs 945 has been allocated for rural health
services

Kerala IT Policy 2012

• To plan, develop and market the state as the most
preferred IT/ITeS investment/business destination in
India

Kerala Technology Startup Policy 2014

• Purpose of this policy is to inaugurate minimum ten
technology business incubators for different sectors of
the state
• Government also aims to attract foreign investments

Kerala Industrial & Commercial Policy Amended 2015

• To promote Kerala as a prime destination for industrial
investments with environmental protection
• Revamp Kerala into an entrepreneurial state by
encouraging private investment in all sectors,
particularly agro processing, services and commerce,
and new emerging sectors
 • Negative growth in agriculture due to
advent of floods in 2018

Growth in GSDP • In response the government spent Rs. 762

and sectors in Cr on irrigation and flood control
Kerala
(year-on-year) • Consistent growth in the service sector due
to government’s focus on education, health
and welfare

Sector Expenditure (in Rs crore) • Investment of Rs. 1000 Cr in infrastructure

Agriculture and allied activities 6421 by the Kerala government for rebuild Kerala
Irrigation and Flood Control 762
Rural Development 3273 initiative
Water Supply, Sanitation, Housing and Urban Development 1948
Police 3675 • In recent proposals the government have
Education 19275
Health and Family Welfare 7186 increased tax on vehicles and foreign liquor
Social Welfare and Nutrition 3816 which will help to generate more revenue
Transport 5878
Welfare of SC/ ST/OBC and Minorities 2167
Salaries 32117 • In 2018-19, agriculture contributed 11%,
Pensions 20351 manufacturing sector contributed 25%, and
Interest Payments 18435
service sector contributed 64% to the GSVA
Revenue deficit
For year 2019-20, Kerala government
targeted the revenue deficit at Rs. 8,770
Cr. But in reality the revenue deficit was
of Rs. 17,474 Cr which was 99.25% more
that the target.

Fiscal deficit
For year 2019-20, Kerala government
targeted the fiscal deficit at Rs 26,291 Cr.
But in reality the fiscal deficit was Rs.
26,186 which was less than the target.

Debt Repayment
Budgeted – Rs. 17,739 Cr
Revised – Rs. 43,735 Cr

This means that the government has

earned less and spent more than what
was budgeted. This happened because
major part of the revenue was used to
repay the debts and other liabilities of
the state.
HARYANA Land Area Population
44212 km² 2.54+ crores
1.54% 1.84%

Per Capita GSDP Literacy Rate

Rs 2,64,207 76.64%

Unemployment HDI
25.6% 0.708
• Historically an agrarian state, Haryana today is a well-
developed industrial state. HSIIDC is the state’s premier
industrial promotion agency. It is responsible for providing
reliable and efficient facilities to entrepreneurs investing in
the state.
• HSIIDC has developed a number of industrial estates,
industrial model townships and specialized parks for
industrial cluster development.
• As of February 2020, the state had seven exporting Special
Economic Zones.
• The Government is developing sector specific theme parks
and subcities along the Kundli-Manesar-Palwal (KMP)
expressway. The 135- km KMP expressway will act as a
Delhi bypass and provide seamless connectivity across NH-
1, NH-2, NH-8 and NH-10. Total cost of the project is US$
414.73 million.
• In budget 2020-21, the state govt. has allocated Rs. 349.3
crore (US$ 49.6 million) for industries and the commerce
department.
• Haryana is self sufficient in food production and the second
largest contributor of food grains to the central pool. The
Department of Horticulture encourages a cluster approach for the
development of fruit cultivation.
• Wheat, sugarcane, rice, cotton, rapeseed and mustard are key
agricultural products of the state. In 2018-19, the state exported
major agricultural products worth US$ 1.3 billion and worth US$
807.76 million between Apr-Dec 2019
• Under its’ ‘Horticulture Vision’ the state Government aims to
double the area of under horticulture from 7.5% to 15% and
triple the horticulture production by 2030. The state Government
has also notified the Haryana Agri-Business and Food Processing
Policy 2018.
• Foodgrain and horticulture production in the state reached 5.30
million tonnes and 8.63 million metric tonnes, respectively,
during 2018-19
• Haryana is a preferred destination for auto majors and
auto component manufacturers. The state is host to
many large automotive players.
• The state produces two-thirds of passenger cars, 50%
of tractors and 60% of motorcycles manufactured in
the country. A significant % of the state’s workforce
is engaged in the automotive industry; Gurgaon &
Faridabad are important automobile centres.
• The International Centre for Automotive Technology
(ICAT) has been set up at Manesar as a part of the
National Automotive Testing & Research &
Development (R&D) Infrastructure Project
(NATRiP). It provides testing and R&D services to
the industry.
• Automobiles and auto component exports from
Haryana were around US$ 945 million in FY19 and
have reached US$ 835.04 million between FY20 (till
December 2019).
Policies
• IT & ESDM Policy 2017
• Entrepreneur & Start up Policy 2017
• Communication & Connectivity Infrastructure Policy 2017
Cyber Security Policy 2017
SINGLE-WINDOW CLEARANCE
MECHANISM
 Policy Highlights of Haryana
Haryana Agri-Business and Food Processing Policy
• Make the state a preferred investment destination for food processing
sector
• Promote start-ups in agri-business space in Haryana
• Increase farmers’ income through new agro-marketing reforms
IT & ESDM Policy
• Attract US$ 2.79 billion as investments in IT & EDSM sector in the next
five years
• Provide employment to 120,000 people in the sector.
• Increase IT & EDSM sector’s contribution to the state’s GDP from 9.4%
to 15%
Enterprise Promotion Policy
• Facilitate ease of doing business in the state,
• Reduction in cost of doing business
• Increased focus on MSMEs
Industrial and Investment Policy 2011
• To achieve higher, sustainable and inclusive economic growth by
attracting investments in a focused and structured manner in potential
areas.
• Encourage private sector investment and promote the manufacturing
sector
• as a key economic driver