From Licence Raj to Jan Vishwas: Freeing India’s Entrepreneurs

UPSC Syllabus- GS 3-Inclusive growth and issues arising from it.

Introduction– India’s entrepreneurial ecosystem has been shaped by its regulatory state—from the restrictive Licence Raj to the partial liberalisation of 1991. However, deregulation remains incomplete. The proposed Jan Vishwas Siddhant promises a shift from permission-based control to trust-based governance, with the potential to boost entrepreneurship, scale enterprises, and create mass employment.

Structural Constraints: Six Regulatory Pathologies

1. Culture of Prior Approval

• Entrepreneurship is inherently permissionless, yet businesses confront thousands of licences, NOCs, and approvals.
• This undermines Article 19(1)(g) of the Constitution and discourages innovation at inception.

1. Proliferation of Regulatory Instruments

• In addition to Acts and Rules, compliance extends to circulars, guidelines, SOPs, FAQs, and office orders—often unnotified but enforceable.
• Entrepreneurs face a compliance maze of 12,000+ non-law instruments, creating uncertainty and discretion.

1. Compliance Blind Spot

• Policymaking emphasises legislative intent but ignores the aggregate compliance burden.
• As of early 2025, India had over 69,000 compliances, though labour code reforms demonstrated that rationalisation can reduce burdens by up to 75%.

1. Enforcing the Unenforceable

• Regulatory ambition often exceeds state capacity, leading to selective enforcement and corruption.
• Unenforceable laws become a substitute for institutional reform and effective governance.

1. Process as Punishment

• Criminal provisions in economic laws are rarely enforced but widely used as threats.
• The criminalisation of cheque-bounce disputes alone has resulted in 43 lakh cases, nearly 10% of total court pendency.

1. Absence of a Single Source of Truth

• Entrepreneurs lack access to an authoritative, updated database of applicable laws and compliances.
• This opacity fuels rent-seeking, litigation, and compliance anxiety.

Jan Vishwas Siddhant: Key Provisions

• Perpetual self-registration for all activities except those linked to national security, public safety, human health, and the environment.
• “Everything is permitted unless prohibited” as the default regulatory principle.
• Risk-based, random, and third-party inspections replacing inspector raj.
• Decriminalisation of minor offences with proportionate civil penalties, in line with DPIIT principles.
• Predictable regulation, with mandatory consultation, adequate transition time, and fixed annual implementation dates.
• Complete digitisation of filings and restriction of penal provisions strictly to Acts and Rules.
• Annual Regulatory Impact Assessments (RIA) by all ministries focusing on compliance costs and enforcement outcomes.

Why it Matters for Growth and Employment

• Despite having 3 crore enterprises, India has only around 30,000 companies with paid-up capital above ₹10 crore. This reflects not a deficit of entrepreneurial ambition, but a regulatory ecosystem that discourages scale and risk-taking.
• Over-regulation keeps firms perpetually small, limits capital formation, and constrains labour productivity—directly affecting non-farm job creation and economic transformation.

Way Forward

• Institutionalise trust-based regulation across states and sectors, beyond central legislation.
• Expand compliance rationalisation beyond labour laws to land, environment, and municipal regulations.
• Strengthen administrative capacity to enforce fewer, clearer, and outcome-based laws.
• Align judicial reforms with economic decriminalisation to reduce pendency and uncertainty.
• Monitor implementation through periodic parliamentary and public review of regulatory impact.

Conclusion

The Jan Vishwas Siddhant signals a shift from control to trust, empowering citizens over subjects. By treating entrepreneurship as experimentation rather than planning, it can boost enterprise scale, jobs, and growth—freeing entrepreneurs to focus on effort, not permissions.