‘A unified ‘One Nation, One Business’ Identity system could dramatically simplify compliance, reducing bureaucratic friction and the opportunities for corrupt practices’
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Despite concerted efforts to combat corruption, red-tapism and bribery remain formidable barriers to business growth in India. A recent “India Business Corruption Survey 2024” presents a troubling picture: 66% of business entities admit to paying bribes, with 54% stating they were coerced to expedite government processes, obtain permits, ensure compliance, or acquire duplicate licences. The problem is most acute in sectors governed by overreaching officials in labour, Goods and Services Tax (GST), income tax, pollution, provident funds, property registration, drug, and health departments.
The economic impact is undeniable. A survey by EY-FICCI shows that four out of five respondents believe corruption is a significant deterrent to foreign direct investment (FDI). This underscores the urgent need to overhaul India’s compliance framework to foster a transparent, fair, and predictable regulatory environment.
While the government initiated compliance reforms two years ago, progress has been sluggish. The Jan Vishwas (Amendment of Provisions) Act, 2023 was a step forward, decriminalising 180 provisions related to imprisonment clauses that burden businesses and entrepreneurs. However, Budget 2025 that was presented by Finance Minister Nirmala Sitharaman announced a ‘Jan Vishwas 2.0’ which aims to further decriminalise around 100 provisions. While this is a welcome step, it barely scratches the surface — over 20,000 provisions with imprisonment clauses remain untouched.
The constant flux of compliance rules
For Indian businesses, compliance is already a complex challenge, but its intersection with corruption makes it nearly insurmountable. Regulatory officials often wield compliance provisions as tools to extract bribes. Many businesses report that unofficial payments are still required to secure regulatory approvals, even when all the necessary compliances are met. A significant flaw in the system is the enormous subjectivity granted to inspectors, who can threaten imprisonment or factory shutdowns without accountability.
Another pressing issue is the overwhelming frequency of compliance updates, which fosters inefficiency and corruption. Over the past year alone, there have been 9,420 compliance updates — an average of 36 daily changes. This staggering rate of change indicates either regulatory incompetence or a deliberate design to create systemic corruption pipelines. A bureaucracy that needs to update rules at such an erratic pace is either incapable of foresight or complicit in fostering an environment where bribes become inevitable.
A recent directive by the Food Safety and Standards Authority of India (FSSAI) is a promising initiative to curb this chaos. Effective this January, changes to food label regulations will be announced only once a year, offering a model for predictable regulatory changes. Similar measures should be extended across all regulatory bodies.
A significant portion of compliance-related imprisonment clauses stem from labour laws, which fall under the Concurrent List of the Constitution. While India has replaced 29 colonial-era labour laws with four modern labour codes, they remain in limbo, awaiting implementation. Without this critical step, the long-touted “biggest labour reforms in independent India” remain mere rhetoric. State governments must act swiftly to operationalise these reforms.
Have a digital-first approach
Establishing a factory in India requires submitting hundreds of self-attested and notarised documents across more than 40 government departments. This archaic system breeds corruption and inefficiency. A digital-first approach could transform the process. Imagine a scenario where entrepreneurs can apply for factory permissions using a single business identifier, granting regulators access to verified documents using an entity called a ‘digi locker’. Such a tamper-proof, authenticated repository could cut approval times from months to days, mirroring the success of India’s Digi Yatra in streamlining airport security.
India’s Digital Public Infrastructure (DPI) has revolutionised governance, but business compliance remains fragmented. Entrepreneurs must navigate at least 23 identity numbers issued by various Union and State authorities — from Permanent Account Number (PAN), Goods and Services Tax Identification Number (GSTIN) and Corporate Identification Number (CIN) to professional tax numbers and factory licences. Each identifier has its lifecycle, requiring periodic renewals and payments, leading to inefficiencies and corruption.
A unified ‘One Nation, One Business’ Identity system could dramatically simplify compliance, reducing bureaucratic friction and the opportunities for corrupt practices. A small budgetary allocation toward this initiative could streamline regulatory interactions, enhancing India’s appeal as a business destination.
A global perspective
The global competition for investment and talent is intensifying. The United States is advancing governance reforms, including its Department of Government Efficiency (DOGE), to make business operations seamless. If the world’s largest economy (GDP $27 trillion) becomes even more business-friendly, why would investors choose India’s $4 trillion economy, where red tape and corruption persist? The answer is simple: they will not . As American efficiency attracts global capital, India risks losing out on both investment and entrepreneurial talent — a fundamental driver of its knowledge economy.
The time for complacency is over. What was an opportunity yesterday is an urgent necessity now . To sustain its economic momentum, India must dismantle bureaucratic hurdles, create a predictable compliance environment, and eradicate corruption.
A clear, well-structured compliance framework — ushered in through the Jan Vishwas 2.0 — is not just about ease of doing business. It is about safeguarding India’s economic future. The government must act decisively to attract global companies and empower Indian entrepreneurs to innovate, expand, and create jobs without fear or unnecessary regulatory friction. India stands at a crossroads. Whether the High-Level Committee for Regulatory Reforms embraces a bold compliance overhaul or hesitates, the stakes are high. The choice is clear: modernise or risk being left behind in the global economic race.
A.S. Mittal is Vice-Chairman, Punjab Economic Policy and Planning Board. The views expressed are personal
Published – March 12, 2025 12:08 am IST
