India wants to become a global economic powerhouse. But sustained growth requires more than capital and consumption. It demands a regulatory environment that does not impede investment. The Cabinet Secretariat is therefore leading a nationwide deregulation exercise aimed at simplifying rules and reducing friction across multiple sectors. Phase 1 is nearing completion. Phase 2 will be wider and more complex.
The central question is whether India can shift from a permission-heavy governance culture to one built on predictable, time-bound regulation. The exercise is not another ease-of-doing-business campaign; it is a systemic attempt to modernise land use, labour rules, environmental clearances and service-sector norms across states. The outcome will influence investment, job creation and productivity far more than incentives or subsidies.
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Streamlining approvals to support faster growth
Industry bodies have for years pointed to inefficient land-use processes, overlapping licences, slow environmental clearances and inconsistent labour norms as major drags on growth. These concerns were central to the World Bank’s Ease of Doing Business research before the index was discontinued in 2021. A predictable institutional environment remains essential for sustaining GDP growth above 7%, a level considered crucial for long-term development by assessments from the IMF and World Bank.
Phase 1 of this exercise focused on 23 reform areas such as simplifying land and building approvals, digitising services, reducing business licences and expanding third-party certification. States such as Tripura and Madhya Pradesh moved quickly. Implementation plans are now in place, and the Centre expects substantial progress before the upcoming chief secretaries’ conference.
What has Phase 1 achieved? Evidence remains patchy
The official reporting shows strong activity, but the evidence of impact remains uneven. Several states claim reductions in approval timelines—for example, shrinking building permit processing from several months to a few weeks—but systematic verification is limited. Few states publish time-stamped data on approvals or rejections.
Independent studies by industry associations show continued variability in municipal permissions, factory licences and utility connections. The gap between portal-based reforms and on-ground experience persists because many procedures remain tied to departmental discretion. For deregulation to be credible, Phase 2 must produce measurable reductions in time, cost and uncertainty.
Phase 2: A deeper structural clean-up
Phase 2 of the deregulation drive also contains 23 reform areas, but its ambition is more structural. Land regulation is the first target. India’s Change of Land Use (CLU) procedures remain slow and opaque, with multiple departments imposing different conditions and timelines. Streamlining or automating CLU processes could reduce the start-up time for industrial projects by months.
The government is also reviewing land allocation in industrial clusters. Many MSMEs struggle to find suitable plots even when land is technically available. Rationalising these allocations could unlock unused capacity in a sector that contributes nearly 30% of GDP and around 40% of exports, according to RBI data.
Why deregulation is harder than it looks
Deregulation is not merely a technical clean-up exercise. It touches the discretionary powers of local departments, municipal bodies and line ministries. Many regulations survive because they generate rents, influence or administrative control. States differ in their willingness to dilute these powers. Even when chief ministers endorse reform, resistance often emerges at the middle and lower levels of bureaucracy.
This political economy explains why similar initiatives—the Business Reform Action Plan (BRAP), earlier single-window systems, and several state-level portals—improved rankings but did not substantially reduce on-ground friction. Phase 2 will succeed only if reform incentives outweigh the benefits of retaining discretion.
Removing obstacles in construction, services and labour
Construction approvals, fire safety rules, utilities permissions and licensing processes remain major sources of delay. Rules under the Shops and Establishments Act are rigid in many states. Proposed single-nodal authorities for industrial approvals could reduce bureaucratic touchpoints and provide businesses with a single accountable interface.
Labour regulation continues to pose difficulties. Although the four central labour codes have been enacted, state adoption is uneven. Digitising registrations and licences under existing laws offers a path to improve efficiency while political debates continue. Labour market flexibility remains a critical condition for attracting global value chains, as reflected in analyses by the World Bank and OECD.
Fixing the slow lane of environmental clearances
Environmental clearances remain chronically delayed. Parliamentary committee reports note that State Expert Appraisal Committees and Environment Impact Assessment Authorities do not meet frequently enough. Several states continue to overshoot statutory timelines, creating uncertainty for investors. Predictable and timely clearances require better-resourced state institutions rather than weaker environmental safeguards.
Rules governing education and health institutions often bear little relation to quality. Minimum land requirements for schools, large campus norms for private universities and mandatory endowment funds raise entry barriers without improving learning outcomes. Phase 2 seeks to relax these norms in line with the National Education Policy (NEP 2020), which emphasises flexibility, digital education and alternative learning models.
Institutionalising reform: India needs regulatory impact systems
Sustaining deregulation requires strong institutions, not one-off campaigns. Most Indian states lack formal Regulatory Impact Assessment (RIA) frameworks, sunset clauses for outdated rules or independent regulatory audits. Dashboards exist but rarely publish data on compliance, rejection rates or departmental delays. Time-bound approvals, automatic deemed approvals for non-compliance with deadlines, and third-party verification could help reduce discretion. Without such institutional mechanisms, the reform momentum will fade after conferences and review meetings.
India has attempted versions of deregulation before: industrial delicensing in the 1990s, state single-window systems in the 2000s, and the BRAP rankings in the past decade. These efforts improved perceptions but did not consistently reduce ground-level frictions. A key weakness was that reforms focused on portals and processes, not on the behaviour of implementing departments. Phase 2 must avoid this trap by ensuring that every rule struck down or simplified results in a real reduction in compliance burden, not just an additional online form.
States vary sharply in administrative strength, digital infrastructure and political priorities. Some reforms may face local resistance, especially where departments fear loss of control. The chief secretaries’ conference may accelerate implementation, but sustaining momentum into 2025 and beyond will be the real test.
India’s deregulation agenda is long overdue. It recognises that growth depends on flexible land rules, predictable labour systems, timely environmental decisions and rational norms in education and health. The challenge now is institutional and political. Only persistent cooperation between the Centre and the states, backed by credible monitoring systems, can make deregulation a durable competitive advantage. Investors respond to outcomes, not announcements.