Ease of Doing Business: India’s Ongoing Regulatory Transformation 

Syllabus:GS3/Economy 

In Context

• Union Budget 2026-27 reinforces Ease of Doing Business as pillar of growth and development, while focusing on digitisation, tax certainty, investor access and litigation reduction.

Ease of Doing Business (EoDB)

• It  has emerged as a cornerstone of India’s economic reform agenda and is reaffirmed as a key pillar of growth and development. 
• The Union Budget 2026-27 focuses on reforms aimed at digital trade facilitation, tax certainty, reduction in compliance and litigation, trust-based customs systems, and an investment-friendly tax regime. 
• These measures build on sustained regulatory and institutional reforms undertaken over the past decade to simplify business procedures, enhance transparency, and reduce compliance burdens, thereby strengthening investor confidence across sectors.

Progress 

• During 2014–25, India attracted USD 748.38 billion in Foreign Direct Investment (FDI), a 143% increase over the previous 11-year period. 
• The number of active registered companies increased from 1.55 lakh in 2020–21 to 1.98 lakh in 2025–26 , indicating a growth of ~27% in 5 years.
• Continued Ease of Doing Business reforms (EoDB), aligned with the Viksit Bharat @2047 vision, will remain vital for strengthening global value chain linkages and driving industry-led growth.

Focus of Budget 

• The Budget reinforces India’s EoDB agenda through measures aimed at enhancing tax certainty, reducing compliance burden, and promoting trust-based governance. 
• Key reforms include rationalisation of MAT, simplification of dispute resolution, and decriminalisation of minor procedural offences. 
• The Budget also advances customs and logistics reforms through digital integration and risk-based clearances to lower transaction costs and improve business efficiency.

Importance

• A business-friendly environment is vital for economic growth, as it attracts foreign direct investment, encourages entrepreneurship, and strengthens India’s role as a global manufacturing hub.
• It also promotes job creation by enabling startups and MSMEs to expand more easily.
• It enhances global competitiveness by improving international rankings and supporting initiatives such as Make in India and Digital India.

Challenges

• Implementation gaps persist in land acquisition, contract enforcement, and judicial processes.
• Regulatory complexity due to overlapping state and departmental rules creates uncertainty.
• Infrastructure bottlenecks in logistics, power, and urban services increase business costs.
• Taxation and compliance burdens, including frequent rule changes, affect investor confidence.

Various steps of Government 

• The government has introduced wide-ranging trade, investment, tax, and regulatory reforms to improve ease of doing business and attract global investment. 
• Key trade facilitation measures include a single digital window for cargo clearance, immediate customs clearance for low-risk goods, rollout of a Customs Integrated System (CIS), and expanded use of AI-based non-intrusive scanning at ports. Investment reforms allow Persons Resident Outside India (PROIs) to invest more in listed Indian companies and raise overall investment limits.
• Minimum Alternate Tax (MAT) is rationalised through exemptions for non-residents, reduced rates, final tax treatment, capital-gains-based taxation of buybacks, and flexible MAT credit usage. 
• Penalty and prosecution regimes are simplified through integrated assessment, reduced pre-deposit requirements, expanded immunity provisions, decriminalisation of minor offences, graded prosecutions, and retrospective immunity for small foreign asset holdings.
• Broader reforms focus on shifting from clearance to compliance, supported by large-scale decriminalisation under the Jan Vishwas Acts, amendments to environmental and forest laws
• The National Single Window System (NSWS) has emerged as a major digital reform, integrating approvals from central and state governments
• The Government has implemented the Business Reforms Action Plan (BRAP) to improve transparency, simplify regulations, and enhance service delivery across States and Union Territories. 
• Other regulatory measures include the RBI’s consolidation of over 9,000 circulars into 238 Master Directions, significantly reducing compliance burden. 
• The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 allows 100% FDI in insurance, simplifies registration for intermediaries, eases share transfer norms, lowers capital requirements for foreign reinsurers, and improves insurance penetration.
• Labour reforms, through consolidation of 29 laws into four Labour Codes, have simplified compliance, reduced approval timelines, increased operational flexibility, digitised registrations and returns, decriminalised minor offences, and raised thresholds for layoffs and closures.
• GST 2.0 reforms introduced in September 2025 simplified tax slabs, reduced rates, corrected inverted duty structures, lowered compliance costs, and expanded the tax base to over 1.5 crore registered taxpayers, supporting formalisation and entrepreneurship.

Conclusion

• India’s Ease of Doing Business framework continues to evolve through a combination of regulatory simplification, digitalisation, and trust-based governance. 
• The Union Budget 2026-27 proposals, alongside ongoing reforms across taxation, labour, finance, and regulation, signal a sustained commitment to reducing compliance burden and improving predictability for businesses. Strong trends in investment inflows, enterprise growth, and formalisation reflect the broader reform momentum built over the past decade. 
• Together, these initiatives strengthen India’s competitiveness and promote growth.  

Source :PIB