India must tackle corruption, reduce red tape to boost business

Source: The post India must tackle corruption, reduce red tape to boost business has been created, based on the article “More signs of overhauling the compliance framework” published in “The Hindu” on 12th March 2025. India must tackle corruption, reduce red tape to boost business

UPSC Syllabus Topic: GS Paper2- Governance-Important aspects of governance, transparency and accountability.

Context: The article highlights corruption and red-tapism as major barriers to business growth in India. It discusses frequent compliance changes, bribery, and slow reforms. It suggests digital solutions, simplified regulations, and bold government action to attract investment and boost economic growth.

How does corruption and red-tapism affect businesses in India?

1. Corruption and red-tapism slow down business growth and create uncertainty.
2. The India Business Corruption Survey 2024 found that 66% of businesses paid bribes, and 54% were coerced for approvals, compliance, and licences.
3. Sectors most affected include GST, income tax, pollution control, labour, and health departments.
4. EY-FICCI survey states that four out of five businesses believe corruption discourages FDI (Foreign Direct Investment).

What are the challenges with compliance rules?

1. Compliance is complex and frequently changing, making it hard for businesses to operate smoothly.
2. There were 9,420 compliance updates in the past year—an average of 36 daily changes, adding confusion.
3. Officials misuse compliance laws to demand bribes, threatening businesses with penalties or shutdowns.
4. Labour laws were modernised into four labour codes, but they remain unimplemented, causing regulatory uncertainty.

What are the key government reforms to improve compliance?

1. 1. The Jan Vishwas (Amendment of Provisions) Act, 2023 decriminalised 180 provisions, reducing penalties on businesses.
2. The Jan Vishwas 2.0 (announced in Budget 2025) aims to decriminalise 100 more provisions.
3. However, 20,000+ provisions with imprisonment clauses remain untouched, keeping businesses under regulatory pressure.
4. The Food Safety and Standards Authority of India (FSSAI) introduced yearly compliance updates to improve predictability.

How can digital solutions help reduce corruption and delays?

1. Establishing a factory in India requires hundreds of notarised documents across 40+ government departments.
2. A ‘digi locker’ system could store and share verified business documents digitally, cutting approval times from months to days.
3. India’s Digital Public Infrastructure (DPI) has improved governance, but business compliance remains fragmented.
4. Entrepreneurs must manage 23 different identity numbers (e.g., PAN, GSTIN, CIN), increasing inefficiency.
5. A ‘One Nation, One Business’ Identity system could simplify compliance, reduce bureaucratic friction, and curb corruption.

Why must India act fast to improve its business environment?

1. India faces global competition: The U.S. ($27 trillion GDP) is making business easier with the Department of Government Efficiency (DOGE).
2. Investors seek a predictable environment: Without fast-tracked reforms in compliance and transparency, India risks losing investment and talent.

3.The government must act decisively to modernise regulations and attract global businesses.

Question for practice:

Examine how corruption, red-tapism, and complex compliance rules impact business growth in India and the reforms needed to improve the business environment.