Editorial 2: More signs of overhauling the compliance framework

Context

Indian businesses struggle with compliance rules being misused for bribes and the frequent changes in compliance requirements.

Introduction

Despite efforts to fight corruption, red tape and bribery still make it hard for businesses to grow in India. The “India Business Corruption Survey 2024” shows a worrying trend: 66% of businesses admit to paying bribes, and 54% say they were forced to do so to speed up government work, get permits, follow rules, or obtain duplicate licenses. The problem is worst in sectors controlled by strict officials, such as labour, GST, income tax, pollution, provident funds, property registration, and health departments.

Need for Stronger Compliance Reforms to Boost Investment

1. Economic Impact of Corruption

• A major barrier to Foreign Direct Investment (FDI).
• Survey Insight: 80% of respondents see corruption as a significant deterrent.
• Highlights the need for a transparent and predictable regulatory system.

2. Slow Progress in Compliance Reforms

• Government initiated reforms two years ago, but progress remains slow.
• Jan Vishwas Act, 2023: Decriminalized 180 provisions with imprisonment clauses.

3. Budget 2025 and ‘Jan Vishwas 2.0’

• New Proposal: Further decriminalization of around 100 provisions.
• Positive step but insufficient—over 20,000 imprisonment clauses still exist.

Challenges of Compliance and Corruption in Indian Businesses

Streamlining Business Compliance Through Digital Integration

• Challenges in Setting Up a Factory: Requires submission of hundreds of documents across 40+ government departments.
  • Manual processes encourage corruption and inefficiency.
• Need for a Digital-First Approach: A single business identifier could simplify approvals.
  • Digi Locker Concept: A secure, tamper-proof repository for verified documents.
  • Could cut approval times from months to days, similar to Digi Yatra’s success in airport security.
•  Fragmented Compliance Landscape: Businesses deal with 23+ different identity numbers from Union and State authorities.
  • Examples: PAN, GSTIN, CIN, factory licenses, and professional tax numbers.
  • Multiple renewals and payments add to bureaucratic inefficiencies and corruption.
• Solution: ‘One Nation, One Business’ Identity: A unified digital identity for businesses to streamline compliance.
  • Reduces bureaucratic hurdles and corruption risks.
  • A small budget allocation could enhance India’s business environment and attract investors.

A global perspective: India Must Act Now to Stay Competitive

• Global competition for investment is increasing.
• The U.S. is implementing governance reforms to simplify business operations.
• With a $27 trillion economy, the U.S. is becoming even more business-friendly.
• India’s $4 trillion economy still struggles with red tape and corruption.
• Investors will prefer the U.S. over India if business conditions don’t improve.
• India risks losing both investment and talent, which are crucial for its growth.
• Action is urgent—what was once an opportunity is now a necessity.
• India must remove bureaucratic obstacles, ensure transparent regulations, and eliminate corruption to sustain economic momentum.

Conclusion

A simple and well-organized compliance system under Jan Vishwas 2.0 is more than just making business easier—it’s crucial for India's economic growth. The government must take strong steps to attract global investors and support Indian entrepreneurs, allowing them to grow, innovate, and create jobs without unnecessary hurdles. India is at a turning point. If the High-Level Committee for Regulatory Reforms pushes for bold changes, it can drive progress. But if it hesitates, India risks falling behind in the global economy. The path forward is clear—modernize or be left behind.