Entrepreneurship in India has never been just about risk-taking or innovation; it has also been about survival amid an overbearing regulatory state. While economic liberalisation in 1991 restored some balance between trust and control, the regulatory ecosystem remains clogged with what can best be described as “regulatory cholesterol”. The proposed Jan Vishwas Siddhant seeks to address this unfinished reform agenda by reimagining how the Indian state governs businesses.
How regulation hardened over decades
India’s entrepreneurial environment was progressively constrained by state interventions in 1956, 1967 and 1976, when licensing, controls and criminal penalties expanded sharply. Liberalisation in 1991 rolled back many of these restrictions, but the shift was partial. The result is a hybrid system where markets are nominally free, yet entrepreneurs remain entangled in layers of permissions, compliances and enforcement uncertainty.
This is not an argument for a lawless economy. Markets need rules, and the state must regulate for safety, health and the environment. The challenge lies in distinguishing necessary regulation from excessive control.
The first pathology: Prior approval as default
At the core of India’s regulatory burden is the culture of prior approval. Innovation is inherently permissionless, and the Constitution recognises the freedom to practise any profession or carry on any business under Article 19. Yet, employers face an army of licences, no-objection certificates and permissions.
Estimates suggest around 500 approvals from central ministries and over 3,200 from state-level bodies. Instead of presuming legitimacy unless proven otherwise, the system presumes illegality until approval is granted.
The second pathology: Proliferation of regulatory instruments
Constitutionally, regulation should flow through laws enacted by legislatures and rules framed by the executive. In practice, the administrative state has created a maze of additional instruments — circulars, guidelines, office orders, FAQs, SOPs, memoranda and press releases — many carrying penal consequences despite lacking legislative backing.
While policymakers read statutes sequentially, entrepreneurs encounter regulation in reverse: compliances first, then a confusing stack of non-law instruments, followed by rules and Acts. Though about 700 central and state laws apply to employers, over 12,000 such non-law instruments effectively govern business behaviour.
The third pathology: Ignoring cumulative compliance load
Regulatory design often focuses on substantive intent while overlooking the cumulative compliance burden. Best practice suggests targeting outcomes rather than microspecifying processes and inputs. Instead, Indian regulation tends to mandate detailed “shall” obligations, with legal consequences for even minor omissions.
At the start of 2025, India had over 69,000 compliances. Recent labour codes have reduced labour-law compliances by about 75 per cent, demonstrating that rationalisation is possible. The challenge is extending this approach across sectors.
The fourth pathology: Enforcing the unenforceable
Indian law frequently mandates goals the state lacks capacity to enforce. The constitutional distinction between Fundamental Rights and Directive Principles reflects realism, not low ambition. When legislation ignores enforcement capacity — such as a single inspector overseeing hundreds of thousands of instruments — it breeds corruption and discretionary power.
True reform lies not in ambitious drafting but in prioritisation: doing less so the state can do it better, focusing on enforceable rules, and improving performance management across the civil services.
The fifth pathology: When process becomes punishment
Criminal penalties dominate India’s regulatory framework, even where prosecution is rare. Jail terms become tools of intimidation rather than deterrence, clogging courts without improving compliance.
The criminalisation of cheque bouncing illustrates this imbalance, contributing to over 43 lakh cases and roughly 10 per cent of judicial pendency. Combined with detailed prescriptions, disproportionate penalties and prolonged trials, the system punishes compliance rather than wrongdoing.
The sixth pathology: Absence of a single source of truth
Transparency and justice demand clarity. Yet, India lacks a comprehensive, live database of all applicable laws, rules and binding instruments. Entrepreneurs often cannot verify which obligations are current or legally valid, pushing them towards rent-seeking and corruption.
A credible regulatory state requires a single, authoritative source where only notified and legally grounded obligations apply.
What the Jan Vishwas Siddhant proposes
The Jan Vishwas Siddhant represents a shift from control-based regulation to trust-based governance. Its key elements include:
- Replacing most licences with perpetual self-registration, except in national security, public safety, health and environment
- Random, risk-based and largely third-party inspections
- Application of DPIIT decriminalisation principles across all laws
- Proportionate penalties instead of routine criminal sanctions
- Mandatory consultations and fixed annual dates for regulatory changes
- Digitisation of filings and restriction of penal provisions to laws and rules
- IndiaCode evolving into a single, live source of all legal obligations
An annual regulatory impact assessment by ministries would track compliances and punishments, embedding accountability into governance.
Why this matters for jobs and growth
India has over 6.3 crore enterprises, yet only around 30,000 companies have paid-up capital exceeding ₹10 crore. This dominance of small, capital-starved firms reflects policy choices rather than cultural constraints. Excessive regulation has stunted firm growth, limited capital accumulation and constrained job creation.
By shifting from “ijaazat” (permission) to “koshish” (effort), the Jan Vishwas Siddhant aims to transform subjects into citizens and ruling into governing.
What to note for Prelims?
- Jan Vishwas Siddhant: trust-based deregulation framework
- DPIIT’s role in decriminalisation of business laws
- Article 19: freedom to practise any profession or business
- Difference between laws, rules and executive instruments
What to note for Mains?
- Impact of regulatory overreach on entrepreneurship and job creation
- Criminalisation of economic activity and judicial pendency
- Need for outcome-based regulation
- Trust versus control in regulatory governance
- Institutional reforms for ease of doing business beyond rankings
