{"id":70837,"date":"2026-04-04T16:49:01","date_gmt":"2026-04-04T11:19:01","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=70837"},"modified":"2026-04-04T16:49:03","modified_gmt":"2026-04-04T11:19:03","slug":"cost-of-doing-business-india","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/04-04-2026\/cost-of-doing-business-india","title":{"rendered":"India\u2019s Next Reform: Lowering Cost of Doing Business in India"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India needs to shift focus from procedural reforms to <strong>cost rationalization<\/strong>, as it faces <strong>high business costs impacting competitiveness.<\/strong> Addressing <strong>high structural costs<\/strong> like credit, land, inputs, logistics, and compliance expenses is crucial for countries like India.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About Cost of Doing Business in India<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Cost of doing business refers to the <strong>total expenses incurred by firms<\/strong> in production and operations, including cost of capital; land and labour costs; input and power costs; logistics and supply chain costs; and compliance and regulatory burden.<\/li>\n\n\n\n<li>India has improved procedural ease, but <strong>structural cost disadvantages persist<\/strong>, affecting global competitiveness.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Determinants<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Cost of Capital: <\/strong>India\u2019s credit-to-GDP ratio (~50\u201355%) is far below global average (~148%).\n<ul class=\"wp-block-list\">\n<li>High government borrowing crowds out private investment.<\/li>\n\n\n\n<li>Higher interest rates compared to China\/Vietnam.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Input Costs: <\/strong>High electricity tariffs due to cross-subsidization.\n<ul class=\"wp-block-list\">\n<li>Inverted duty structures increase the cost of intermediate goods.<\/li>\n\n\n\n<li>Limited access to advanced technology inputs.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Logistics Costs: <\/strong>Logistics costs reduced <strong>from ~13\u201314% to ~8% of GDP<\/strong>, still higher than global benchmarks.\n<ul class=\"wp-block-list\">\n<li>Port delays, customs inefficiencies, and uncertainty persist.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Land Acquisition: <\/strong>Fragmented land markets, unclear titles, and disputes increase costs.<\/li>\n\n\n\n<li><strong>Compliance Costs: <\/strong>Heavy regulatory burden, especially on MSMEs; and lack of proportional, risk-based regulation.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Related Issues &amp; Concerns<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Structural Cost Disadvantage: <\/strong>India\u2019s firms face <strong>higher input and financing costs<\/strong>, reducing export competitiveness.<\/li>\n\n\n\n<li><strong>Logistics &amp; Trade Inefficiencies: <\/strong>Delays and unpredictability in customs increase transaction costs.<\/li>\n\n\n\n<li><strong>Credit Constraints: <\/strong>Limited financial deepening restricts MSME growth.<\/li>\n\n\n\n<li><strong>Regulatory Overload: <\/strong>Excessive compliance discourages formalization.<\/li>\n\n\n\n<li><strong>Land &amp; Infrastructure Bottlenecks: <\/strong>Project delays increase financing and operational costs.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Government Efforts<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Union Budget 2026-27: <\/strong>It reinforces <strong>Ease of Doing Business<\/strong> as pillar of growth and development, while focusing on <strong>digitisation, tax certainty, investor access and litigation reduction.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Focus on digital trade facilitation by single, interconnected digital window for custom clearance and <strong>Custom Integrated System.<\/strong><\/li>\n\n\n\n<li><strong>Exemption from Minimum Alternate Tax (MAT)<\/strong> to all non-residents who pay tax on presumptive basis.<\/li>\n\n\n\n<li>Trusted importers recognised in risk systems, reducing physical verification and enabling factory-to-ship clearance.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>National Single Window System (NSWS):<\/strong> It guides in identifying and applying for approvals according to the business requirements.\n<ul class=\"wp-block-list\">\n<li>It integrates approval processes across 32 Central Departments and 32 State Governments, and has access to over 698 central and 7435 state approvals.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Digital financial ecosystem<\/strong> like UPI, GST data, Open Credit Enablement Network (OCEN) for credit access<\/li>\n\n\n\n<li><strong>PLI Schemes<\/strong> to boost manufacturing competitiveness.\n<ul class=\"wp-block-list\">\n<li>These reforms have improved processes, but <strong>cost reduction remains incomplete<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Ease of Doing Business reforms<\/strong> (digitization, single-window systems)<\/li>\n\n\n\n<li><strong>National Infrastructure Pipeline (NIP)<\/strong> and <strong>Gati Shakti<\/strong><\/li>\n\n\n\n<li><strong>National Monetisation Pipeline (NMP)<\/strong> (\u20b916 lakh crore target)<\/li>\n\n\n\n<li><strong>GST implementation<\/strong>\u00a0 for reduced cascading taxes<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How India Can Compete with China &amp; Vietnam?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Lower Cost of Capital: <\/strong>Reduce <strong>Statutory Liquidity Ratio (SLR)<\/strong>, improve credit access; and use fintech (GST, UPI data) for risk-based lending.<\/li>\n\n\n\n<li><strong>Rationalize Input Costs: <\/strong>End cross-subsidization in power; correct inverted duty structures; and encourage technology-linked FDI.<\/li>\n\n\n\n<li><strong>Improve Logistics Efficiency: <\/strong>Shift to <strong>tech-enabled, trust-based customs; <\/strong>reduce dwell time at ports; and expand multimodal transport.<\/li>\n\n\n\n<li><strong>Land Reforms: <\/strong>Standardised leasing models; and clear land titles and faster dispute resolution.<\/li>\n\n\n\n<li><strong>Regulatory Reforms: <\/strong>Introduce <strong>risk-based, proportionate regulation<\/strong>; and sunset clauses to reduce regulatory burden.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Forward: From Ease to Cost Competitiveness<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Benchmark India\u2019s cost structure with <strong>China, Vietnam, and ASEAN economies<\/strong>.<\/li>\n\n\n\n<li>Focus on <strong>factor market reforms<\/strong> (land, labour, capital).<\/li>\n\n\n\n<li>Promote <strong>export competitiveness<\/strong> through cost efficiency.<\/li>\n\n\n\n<li>Encourage <strong>public-private partnerships and institutional reforms<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Learn from Vietnam &amp; China<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Vietnam: <\/strong>Export-oriented policies, efficient logistics, FDI integration<\/li>\n\n\n\n<li><strong>China: <\/strong>Scale economies, infrastructure depth, cheaper credit<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India has successfully improved the <strong>ease of doing business<\/strong>, but the next phase requires <strong>reducing the cost of doing business<\/strong>.<\/li>\n\n\n\n<li>A competitive cost structure is essential for boosting exports, expanding manufacturing, creating formal employment, and achieving <strong>sustained economic growth of more than 8%.<\/strong><\/li>\n\n\n\n<li>Thus, <strong>cost competitiveness will define India\u2019s global economic position<\/strong>, along with <strong>procedural ease.<\/strong><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Daily Mains Practice Question<\/strong><br><strong>[Q]<\/strong> Discuss the key structural factors contributing to the high cost of doing business in India. Suggest reforms needed to make India competitive with countries like China and Vietnam.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><a href=\"https:\/\/m.economictimes.com\/opinion\/et-commentary\/indias-next-reform-push-must-target-cost-of-doing-business\/articleshow\/130006851.cms\" target=\"_blank\" rel=\"noopener\">Source: ET<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Published on:<\/strong> 04 April, 2026<\/p>\n<p>India needs to shift focus from procedural reforms to cost rationalization, as it faces high business costs impacting competitiveness. Addressing high structural costs like credit, land, inputs, logistics, and compliance expenses is crucial for countries like India.<\/p>\n","protected":false},"author":15,"featured_media":70839,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-70837","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/cost-of-doing-business-in-india.webp","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/70837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=70837"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/70837\/revisions"}],"predecessor-version":[{"id":70838,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/70837\/revisions\/70838"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/70839"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=70837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=70837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=70837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}