A disturbing picture has emerged in the recently conducted ‘India Business Corruption Survey-2024’. In this survey, 66 percent of business entities admitted to paying bribes, while 54 percent say they were forced to pay bribes to speed up government procedures, obtain permits or obtain duplicate licenses. The problem is most acute in areas governed by officials in the departments of labour, GST, income tax, pollution, provident fund, property registration, drugs and health.
The economic impact cannot be denied. The survey conducted by EY-FICCI reveals that four out of five people believe that corruption is a significant obstacle to foreign direct investment (FDI). This highlights the urgent need to improve India’s regulatory framework to promote a transparent, fair and predictable regulatory environment.
While the government initiated reforms in the area of compliance with government regulations two years ago, progress has been slow. The Jan Vishwas Act of 2023 was a good initiative, decriminalising 180 sections carrying prison sentences that were burdensome for businesses and entrepreneurs. However, Finance Minister Nirmala Sitharaman’s 2025 Budget announcement on ‘Jan Vishwas 2.0’ aims to decriminalise around 100 more related provisions. While this is a welcome step, it barely touches the ground as over 20,000 related provisions carrying prison sentences still remain in place.
Compliance with government regulations: For Indian businesses, complying with government regulations is already a complex challenge, but its nexus with corruption makes it almost impossible. Regulatory officials often use provisions related to compliance with government regulations to solicit bribes. Many businesses report that they still have to pay bribes to obtain regulatory approvals even when all required government regulations are fully complied with. A significant flaw in the system is the excessive leeway given to inspectors, who can threaten imprisonment or factory closure without accountability. Another serious issue is the updating of government regulations, which encourages inefficiency and corruption. In the past year alone, 9,420 regulations were updated, an average of 36 changes per day. This staggering rate of change reflects either regulatory incompetence or a deliberate plan to create a systemic corruption pipeline. A bureaucracy that needs to update regulations at such an irregular pace is either incapable of foresight or is complicit in encouraging an environment where bribery becomes necessary.
The recent directive by the Food Safety and Standards Authority of India (FSSAI) is a great initiative to check this anomaly. Effective from this January, changes in food labelling rules will be announced only once a year, offering a model for predictable regulatory changes. Similar measures should be implemented across all regulatory bodies.
Labour Laws: A significant portion of the penal provisions relating to compliance with rules arise from the labour laws, which come under the Concurrent List of the Constitution. While India has replaced 29 colonial-era labour laws with four modern labour codes, they are still hanging in the balance, waiting to be implemented. Without this important step, the long-touted ‘biggest labour reforms in independent India’ have become mere rhetoric. State governments must work fast to implement these reforms.
Simplifying business permits: Setting up a factory in India requires submitting hundreds of self-attested and notarised documents to over 40 government departments. This outdated system breeds corruption and inefficiencies. A digital-first approach could transform the process. Imagine a scenario where entrepreneurs can apply for factory permits using a single business identity card, providing regulators with access to documents authenticated by an entity called DigiLocker. Such a tamper-proof, authenticated repository can reduce approval times from months to days, demonstrating the success of India’s digital journey in streamlining airport security.
One Nation, One Business Identity: India’s Digital Public Infrastructure (DPI) has revolutionized governance, but compliance with business regulations is still fragmented. Entrepreneurs have to understand at least 23 identification numbers issued by various federal and state authorities, ranging from PAN, GSTIN and CIN to professional tax numbers and factory licenses. Each identity card has its own life cycle, requiring periodic renewals and payments, which increases inefficiency and leads to corruption. A unified One Nation, One Business Identity System could dramatically simplify compliance with government regulations, reduce opportunities for bureaucratic conflicts and corrupt priorities, and reduce opportunities for corruption. A small budget allocation for this initiative could streamline regulatory interoperability, increasing India’s attractiveness as a business destination.
Global Context: Global competition for investment and talent is intensifying. The United States proposes a Department of Commerce to make doing business easier.
