Ease of Doing Business: India’s Ongoing Regulatory Transformation

From ₹1.55 Lakh Firms to ₹1.98 Lakh: India’s Regulatory Overhaul and the Road Ahead

Between 2020 and 2026, the number of active registered companies in India grew by 27%, rising from 1.55 lakh to 1.98 lakh. This growth is no accident. It reflects the government’s persistent push to enhance the Ease of Doing Business (EoDB), a cornerstone of economic reforms over the past decade. With the Union Budget 2026-27, the government has reaffirmed EoDB as a key pillar of its economic strategy, introducing measures focusing on digitalisation, tax certainty, and reduced compliance burdens. Yet, the tension between ambitious reforms and on-ground execution remains unresolved.

The Policy Instrument: What the Budget Brings

The Budget 2026-27 brings continuity and some new vigor to India’s regulatory transformation. Key initiatives include rationalisation of the Minimum Alternate Tax (MAT), reforms to simplify tax litigation, and the digital integration of customs clearances to minimise transaction costs. The government has also doubled down on trust-based governance, decriminalising over 1,500 minor offences under the Jan Vishwas (Amendment) Acts and streamlining numerous compliance protocols through the National Single Window System (NSWS).

Particular attention has been paid to improving investor confidence. The Budget expands provisions for foreign direct investment (FDI), including raising the ceiling for investments by Persons Resident Outside India (PROIs). Between 2014 and 2025, India attracted $748.38 billion in FDI — a 143% increase over the preceding 11 years — signifying the rapidly growing appeal of India’s economic potential. Labour compliance has also seen consolidation through the unification of 29 laws into four Labour Codes, significantly reducing operational complexity for businesses.

On paper, these reforms aim to achieve not just an improvement in global rankings but also to foster greater enterprise-led job creation and reduce the regulatory maze that has traditionally stifled startups and MSMEs. The ultimate goal extends to aligning with India’s Viksit Bharat @2047 vision, intended to make the country a modern, industrialised economy by its centenary of independence.

The Case For: Why This Matters

The case for EoDB reforms is straightforward: a simpler, more predictable regulatory framework creates fertile ground for investment and entrepreneurship. Since enacting changes such as the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which allows 100% FDI in insurance and lowers capital entry barriers, India has seen rising interest in sectors previously constrained by overregulation. Similarly, the rollout of GST 2.0 — with streamlined tax slabs, reduced compliance costs, and over 1.5 crore registered taxpayers — has helped formalise the economy and broadened the tax base.

Operational efficiency is another win. For instance, AI-enabled non-intrusive customs scanning and risk-based clearances at ports are expected to reduce cargo clearance times substantially. The Customs Integrated System (CIS), in tandem with digital trade facilitation, is designed to cut down transaction costs while enhancing logistics competitiveness. Given the soaring global emphasis on supply chain resilience, these measures significantly enhance India's credibility as a reliable hub in global value chains.

Perhaps more than anything, these reforms reflect a philosophy shift: from regulatory policing to compliance facilitation. This is visible in the push for a trust-based framework, offering immunity provisions, graded prosecutions, and retrospective relief for minor infractions. Such steps reduce not just economic costs but also the psychological burden on enterprises navigating India’s labyrinthine regulatory landscape.

The Case Against: Structural Bottlenecks Still Loom Large

Despite the ambitious announcements, implementation gaps continue to undercut reform outcomes. For instance, the enduring challenges of land acquisition and contract enforcement remain glaring barriers to doing business. While measures like the NSWS simplify initial business approvals, subsequent hurdles involving states’ discretionary powers over land or labour often negate earlier efficiencies. Investors frequently encounter a fragmented regulatory environment owing to overlapping rules across central and state governments.

Judicial delays exacerbate these issues. Contract enforcement in India takes, on average, over 1,445 days — one of the longest timelines globally. While the Budget aims to simplify procedural litigation and expand alternate dispute resolution mechanisms, these measures do not address the deeper institutional inefficiencies clogging the judiciary.

Taxation reforms, a marquee component of this regulatory overhaul, face similar inconsistencies. Frequent amendments to tax rules — though couched as rationalisation — create confusion, particularly for foreign investors apprehensive of India’s long history of retrospective taxation policies. The government's trust-based approach would be more credible if complemented by consistent, predictable policymaking rather than periodic, piecemeal changes.

What Other Democracies Did: Targeted Simplifications in Singapore

India’s EoDB reforms often draw comparisons with Singapore, a global model for regulatory efficiency. Singapore’s approach — offering single-window clearance systems, a robust mediation framework for contract disputes, and near-complete digitisation across sectors — is less about grand announcements and more about consistent execution. For example, its 2014 roll-out of the One-Stop Business System achieved over 90% business registration within a day. While India has made strides with NSWS, the scale and complexity of federal-state dynamics mean it lacks the precision of such streamlined models.

Singapore’s success also underscores the value of addressing infrastructure concurrently with regulatory reforms. With India’s logistics costs estimated at ~13-14% of GDP, compared to ~8-9% for economies like Singapore, achieving significant competitiveness gains demands not just policy changes but also adequate investments in infrastructure efficiency.

Where Things Stand: Risks and Realities

The reforms in this year’s Budget undoubtedly signal progress. The emphasis on trust-based compliance and digital trade facilitation aligns well with India's aspirations to compete for global capital and talent. However, the gap between intent and execution could dilute their transformative potential. Issues of judicial backlog, regulatory overlap, and infrastructure bottlenecks loom larger than the Budget’s measures for litigation reduction or MAT simplification can resolve in isolation.

India no longer faces the question of whether EoDB reforms are effective; the evidence of FDI growth and enterprise proliferation is unambiguous. The question, instead, is how much deeper these structural reforms can go. Without addressing land markets, faster adjudication, and power sector inefficiencies, even the best policies risk running aground.

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