either the Central (as regards, for example, income tax, pensions, postal services) or the State government (for instance for education, health, and crucially land records).<sup>42</sup> Among the integrated NeGP projects, the Single Window Business Registration Act 2013 provided for the establishment of a single-window registry as a one-stop shop for the provision of online government-tobusiness (G2B) services to investors and business communities in the country. The resulting online platform ( _eBiz_ , launched in 2015) can now be used by anyone planning to start operations or having an existing business in India, and provides online submission and processing of composite forms and one-time payments.<sup>43</sup> In addition, States continue to have several other e-governance programs, as well as dedicated single-window portals.<sup>44</sup> Firms interviewed during our fieldwork almost unanimously expressed satisfaction in how these initiatives are in general reducing the complexity in obtaining the information and services required to start and run a business. In Uttar Pradesh, interviewees also appreciated how the introduction of electronic platforms is starting to bear some fruit in terms of reduced corruption. Nevertheless, both in Telangana and Uttar Pradesh enterprises noted how in practice many applications for various licenses and clearances still require the relevant documentation to be handed in manually into public offices, despite the existence of State singlewindow portals. In Telangana, the same applies to the single window for land acquisition under the land record modernization program. Once more, this seems to weigh differently on bigger and smaller firms, as the latter do not have a large enough workforce to assign employees to these tasks without significantly compromising operations.

# 6. Does governance matter?

In line with our observations from Section 5, where we documented how institutional quality and the practical implementation of laws and regulations seem to be significant determinants of firm performance, we now turn our attention to governance. We assign states to two groups based on their level of governance (see Table 6.1), and we are interested in assessing whether the pattern of factor misallocation over time differs between the two sub-samples. As discussed in Section 3.3 on data sources above, we distinguish between “high-” and “low-governance” states based on the governance rankings provided by Transparency International India and the Centre for Media Studies (2005).

In Tables 6.2 and 6.3, we confirm that the measure correlates well with firm perceptions on both business obstacles and corruption as captured by the latest wave of the Enterprise Survey of the World Bank.<sup>45</sup> When we group States according to our “quality of governance” classification, we observe in Table 6.2 that firms in States with lower governance are far more likely to report major or severe obstacles to operations along

> 42 Details can be found on the web portal of the Ministry of Electronics and Information Technology of the Government of India, cf. http://meity.gov.in/content/mission-mode-projects.

> 43 _eBiz_ has been developed as a PPP between Infosys Technologies Limited (Infosys) and the Department of Industrial Policy and Promotion (DIPP) of the Ministry of Commerce and Industry of the Government of India. Businesses can apply for 20 central government services (plus a number of state government services in Andhra Pradesh, Odisha and Delhi), to obtain licenses, approvals, clearances, no objection certificates, permits, and for filing of returns. The services available on the portal include those from Ministry of Corporate Affairs (MCA), Reserve Bank of India (RBI), Department of Industrial Policy and Promotion (DIPP), Central Board of Direct Taxes (CBDT), Directorate General of Foreign Trade (DGFT), and Employees’ Provident Fund Organisation (EPFO).

> 44 An updated list is kept on the web portal of the national level initiative India Development Gateway (InDG), see <u>http://vikaspedia.in/e-governance/national-e-governance-plan/copy_of_e-governance-in-state-and-services.</u>

> 45 Although a wave of the Enterprise Survey for the year 2005 exists, we focus on the latest wave (year 2014) due to its improved sample frame, which is representative at the State level. This was not the case for 2005 edition of the survey.

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