India's journey towards becoming a globally competitive, inclusive, and sustainable economy will be shaped by the strength and dynamism of its states. By embracing coordinated, data-driven, and outcome-focused reforms, states can unlock unprecedented growth opportunities.
States hold unique influence over business regulation, land management, labour markets, energy, education, healthcare, agriculture, and sustainability. These are vital for industrial expansion, job creation, productivity enhancement, and inclusive development. Aligning national strategies with robust state-led initiatives is, therefore, essential.
A template already exists. The successful rollout and recent reforms of GST demonstrated how Centre-state coordination through the Empowered Committee of State Finance Ministers and the GST Council can create effective, carefully-crafted, consensus-based reforms that benefit the entire nation. The model should be extended to build consensus on land, labour, power, agriculture, education, and fiscal sustainability.
Creating an enabling business environment is a fundamental step for encouraging private investment. States should streamline all approvals through the national single-window system, with time-bound clearances and legally recognised digital certificates to reduce delays. Fast-tracking dispute resolution through dedicated courts and alternative mechanisms will further ease business. Decriminalising business-facing state laws would strengthen trust between government and industry.
Addressing land issues remains a priority. States could establish online, integrated land authorities to digitise and integrate land data across departments. These could serve as single points for allotment, provide clarity on disputed parcels, and help transition to government-guaranteed land titles.
Simplifying forest land diversion for projects under 50 hectares, especially in mining, by delegating authority to states, can also accelerate development without compromising safeguards.
Labour reforms are another area for swift action. Prompt implementation of the four Labour Codes, with clear transition plans and advisory support from the Centre, will encourage industry and employment generation, especially in labour-intensive sectors. Compliance should be centralised via an enhanced Shram Suvidha portal offering single-window filings, annual returns, and time-bound approvals.
Energy is an important factor input, and its costs and availability are key determinants of competitiveness. Fostering private sector participation in distribution and transmission can dramatically improve efficiency. States adopting reforms such as tariff-based competitive bidding and discom privatisation should be rewarded with incentives like enhanced borrowing limits or long-term, interest-free capital loans. Rationalising and eventually phasing out open access charges will also be critical in making the electricity sector more competitive and affordable.
Another area that the states need to address is instituting more sustainable mechanisms for providing free or cheaper power to certain user segments. This should be done through direct benefit transfers by the states to targeted end users, helping improve discoms’ financial health immensely.
Fiscal stability remains a cornerstone for sustainable growth. States can enhance their financial resilience by adopting long-term fiscal risk reporting, drawing inspiration from international best practices such as Brazil’s decade-long forecasts and the UK’s 50-year projections. They should also work towards prioritising expenditure to bring down overall fiscal deficits and debt levels.
Unlocking the value of state assets presents another opportunity. On the lines of the National Monetisation Plan, states could draw up their own plans. The central government could support the intervention through a dedicated asset monetisation cell within the finance ministry or Niti Aayog to provide technical support. This will open a new resource stream for states to undertake infrastructure and developmental projects.
Agriculture, the backbone of rural livelihoods, must also be revitalised. States with lower irrigation levels can replicate successful models from Telangana and Madhya Pradesh. Extending concessional loans for climate-resilient irrigation systems will bolster productivity and counter erratic monsoons.
To reap the demographic dividend, the Centre and states must work together to provide quality education, healthcare, and jobs for the youth. For job creation, integrating state and national employment databases under a National Career Service platform, enhanced with AI-driven matching, can bridge the skills-opportunity gap.
Healthcare access can be significantly improved by adopting hub-and-spoke models for service delivery in small towns, complemented by digital command hubs and e-ICUs to ensure quality care in remote areas.
States also have a vital role in promoting sustainable development. Green procurement policies prioritising crop residue-based products can drive a circular economy, reduce pollution and support rural entrepreneurship. These state efforts should be supported under the Centre’s Green Procurement Scheme.
It is the proactive engagement of states across key sectors that will ultimately define the pace and breadth of India’s growth story.
Sanjiv Bajaj | Former President, CII
Chandrajit Banerjee | Director General, CII
(Views are personal)
