Mumbai, May 24 (KNN) Concerned over spate of scandals involving  chit funds and ponzi schemes, the  Reserve Bank of India (RBI) has asked the state governments to focus on  quality of governance so that business and industrial climate can be improved.

The message was conveyed by RBI Governor D Subbarao at a meeting of the state finance secretaries here earlier this week. Chairman of the 14^th Finance Commission and former RBI chief Y V Reddy was also present at the meeting.

Subbarao told the state secretaries that they can address “governance concerns” to create enabling environment for investment.

The quality of governance which results in hurdles in doing business has been one of the main issues facing the Indian industry, particularly small and medium scale business. 

According to the World Bank report, India figures at 132 on easing of doing business. When it comes to the parameter of enforcing business contracts, India ranked 184 and it further ranks at 182 in terms of dealing with construction permits.

India is the second most difficult country in terms of enforcing business contacts and ranks among the lowest five when it comes to dealing with construction permits, according to the World Bank ranking of doing business in 185 countries.

The RBI chief also discussed the issue of sustainability of debts of the state governments. He said the RBI would be doing a study on Indian sub-national debt sustainability to understand the dynamics of the problem. He also felt that the quality of fiscal consolidation is important and States should focus more on expenditure compression.

 While the state of state finance may not directly impact the business and industry, it has medium and long-term implications since the state exchequer would have to be eventually funded by the local taxes like VATs.

The RBI chief stressed on coordination between the State Governments and all other stake holders for increased surveillance at ground level in matters relating to funds  and ponzi schemes and multilevel marketing schemes.  (KNN)