Measuring state–business relations within developing countries: An application to Indian states

Effective relations between states and business have been increasingly identified as an important institution for sustaining economic development. This paper constructs quantitative indices measuring the quality of state–business relations (SBRs) across Indian states in the 1985–2008 period. It represents the first effort to systematically characterise SBRs across sub-national units within a country without resorting to subjective surveys. We discuss the possible sensitivity of the indices to minor and major definitional changes and examine the evolution of SBRs across Indian states and at the national level through the study of cross‐sectional and secular trends in these indices. The results suggest that SBRs have improved over time in all states barring Bihar. Rankings of states in terms of the SBR index show varying time trends—stable and high ranks for states like Andhra Pradesh, Karnataka, and Tamil Nadu, stable and low ranks for states like Uttar Pradesh and West Bengal, rapidly improving ranks for states like Haryana, Punjab and Rajasthan and swift deterioration in ranks for states like Bihar and Madhya Pradesh. Copyright (C) 2011 John Wiley & Sons, Ltd.