One of the most important ideas in Prime Minister (PM) Narendra Modi’s Independence Day speech last August was the call for a new wave of reform built around deregulation. Since Independence, the channels through which enterprise flows have progressively calcified. The business environment remains clogged by a thicket of rules, permissions, registrations, approvals, inspections, and renewals. The result is a structural tax on entrepreneurship.
At Independence, India adopted universal franchise and began industrialisation by placing the State in control of the commanding heights of the economy. This gradually evolved into the Licence Raj. Between 1960 and 1991, Indian enterprise was constrained by pervasive controls: Production levels, product lines, and capacity expansion all required government approval. In effect, the Indian voter was subsidised by a protected manufacturing sector that could get away with producing poor-quality goods for the Indian consumer.
Unlike nearly every country that grew rapidly after the World War II — be it Japan, Germany, South Korea or more recently China and Vietnam — India did not build a strong export orientation. Exporters grew by selling to the demanding American consumer and won by continuously improving price and quality. India exported little and depended primarily on domestic consumption.
Between 1960 and 1991, growth was weak, infrastructure investment was inadequate, State-owned enterprises were inefficient, and the economy was tightly controlled. The 1991 reforms removed many of the worst distortions, reduced tariffs, and freed prices, but did not create a strong export orientation. Poor infrastructure remained a constraint, and despite liberalisation, India continued to be among the more protected economies. That began to change after 2014 with a massive infrastructure buildout. India added more roads than existed in Germany, doubled the number of airports, quintupled port capacity, built 30 million houses, increased rail capacity, and brought infrastructure to a level from which it could genuinely compete. Yet it remains very protected and regulated.
The new transactional geopolitical environment demands an Indian industry that can compete globally, especially as India enters FTAs with the UK, Australia, the UAE, and the EU. The PM recognized the scale of reform required to unclog India. The “atmanirbhar” India we need is not one that merely competes with the best in our market, but one that captures share in theirs. Self-reliance, in that sense, is not insulation. It is strength.
To drive this effort, three committees have been set up. Two focus on deregulation—one under Rajiv Gauba and another under the Cabinet Secretary. A third, also under Rajiv Gauba, is developing reform ideas for Viksit Bharat. I am privileged to serve on the deregulation committee chaired by Rajiv Gauba.
The work has been intense. We have consulted more than 500 stakeholders across sectors, engaged all relevant ministries and regulatory bodies such as FSSAI and BIS, and received more than 1,000 recommendations for reform. Many reforms have been identified and are in discussion or pending implementation. But progress has already been made — not merely by writing reports, but by changing things on the ground. The approach has been simple: Ask why a licence, approval, or registration is needed at all. If it is needed, how costly it is to get, how complex to comply with the provisions, how long it takes to obtain, how standardised the process is, how long it remains valid, whether renewal is necessary, what penalties apply, whether criminal provisions exist, and whether they are justified. These questions sound basic, in India, they are revolutionary.
Over the last six months, several steps have already been taken to ease the business environment for MSMEs. The investment threshold for small companies has been raised to ₹100 crore, reducing the compliance burden for 10,000 companies. They have been exempted from corporate social responsibility requirements, their compliance obligations have been reduced, and perpetual validity has been granted for consent to operate, eliminating renewals and saving at least 600,000 man-hours of compliance effort.
At the higher end of the spectrum, after extensive consultations with 34 ministries and departments, Jan Vishwas Act 2.0 now covers 717 provisions and decriminalises 1,018 offences, strengthening trust-based supervision. In the case of FSSAI, the registration threshold has been raised, automatic registrations introduced, turnover thresholds for state and central licences materially increased, and perpetual licences for food business operators enabled through annual payments. For drugs, licences for manufacturing for examination, testing, or analysis have been replaced with simple notification to CDSCO, and parallel processing of lab testing and clinical trials has been permitted.
A similar approach has been applied to the Companies Act, reducing compliance burdens for startups and new companies, enabling faster mergers by lowering the shareholder approval requirement from 90% to 75% of those present and voting, and simplifying Director KYC requirements.
Recognising the integrated nature of value chains, and the fact that tariffs on raw materials and intermediate goods raise costs by 10–15%, quality control orders in job-creating sectors such as textiles have been removed for fibres, yarns, plastics, and polymers. Similar measures have been taken for raw materials and intermediates such as base metals, solder wire, aluminium, and alloys.
The objective is to prepare India for the FTAs now being negotiated and to build an industrial base capable both of accessing newly opened markets and defending its position at home. The underlying bet is that regulation should become trust-based. Free Indian industry from needless, time consuming, and complex regulation. The bet is on Indian entrepreneurs. They do not lack talent. They do not lack ambition. They do not lack resilience. What they often lack is a level-playing field. Free them from needless regulatory friction and they will surprise the world. Deregulation is the next big reform.
Janmejaya Sinha is chairman BCG, India. The views expressed are personal
