Entrepreneurship is fundamentally about endurance — surviving long enough for opportunity and luck to converge. In India, this challenge was significantly intensified by policy choices in 1956, 1967, and 1976, which expanded state control over private enterprise. The liberalisation reforms of 1991 partially restored balance between regulation and trust, but the reset remained incomplete. The unfinished agenda of deregulation is not about shrinking the state to irrelevance. If entrepreneurship thrived best without rules, poorly governed regions would be magnets for investment, which they are not. What India needs instead is trust-based regulatory reform, as envisioned under the Jan Vishwas Siddhant, to address six deep-rooted regulatory failures that continue to hold back entrepreneurship, MSME growth, job creation, and long-term economic competitiveness.
Prior Approval as the Default Mindset
The first and most damaging regulatory failure is the insistence on prior approval. Innovation, by definition, is permissionless, and Article 19 of the Constitution guarantees the right to carry on business. Yet Indian entrepreneurs routinely confront the question: “Who authorised this?” Licences, permissions, no-objection certificates, and consent orders dominate the business lifecycle. Employers today deal with nearly 500 approvals from central ministries and more than 3,200 at the state level. This mindset treats entrepreneurship as an exception rather than a norm, undermining the ease of doing business in India and discouraging first-generation founders and startups.
Proliferation of Regulatory Instruments
The second structural flaw lies in the uncontrolled expansion of regulatory instruments. While the Constitution envisages laws passed by Parliament and rules framed by the executive, the administrative state has added multiple layers — circulars, guidelines, advisories, office orders, FAQs, SOPs, memoranda, and schemes — many of which carry penal consequences despite weak statutory grounding. Policymakers typically read regulation top-down, beginning with the Act. Entrepreneurs experience it bottom-up: day-to-day compliance shaped by dozens of quasi-legal instruments. Although around 700 central and state laws affect employers, thousands of non-law instruments materially influence business operations, increasing uncertainty and compliance risk.
The Compliance Accumulation Problem
A third governance gap is the failure to account for cumulative compliance obligations. Policymakers often focus on legislative intent while overlooking how obligations stack up over time. Sound regulatory practice prioritises outcomes rather than micro-managing activities, inputs, or processes. Compliance should be understood strictly as a legally enforceable obligation — a “shall,” not a “should.” At the beginning of 2025, India had over 69,000 such compliances. The new labour codes represent a rare reform success, reducing labour-related compliance by nearly 75 per cent. This approach to compliance rationalisation now needs to be extended across sectors that affect MSMEs and growing enterprises.
Laws That Outrun Enforcement Capacity
The fourth regulatory failure is the tendency to legislate without regard to enforcement capability. The constitutional separation between enforceable Fundamental Rights and aspirational Directive Principles reflects realism, not low ambition. When laws assume inspection and monitoring capacity that does not exist — such as one inspector overseeing hundreds of thousands of units — discretion and rent-seeking fill the gap. The distance between how laws are written, interpreted, and enforced widens. Meaningful regulatory reform in India requires sharper prioritisation: the state doing fewer things better, strengthening performance management across its vast bureaucracy, and favouring clarity and enforceability over aspirational drafting.
Criminalising Process Instead of Outcomes
The fifth systemic weakness is the overuse of criminal penalties for procedural failures. Recent labour reforms and the proposed Jan Vishwas Bill acknowledge a basic reality: imprisonment deters only when prosecutions are credible and timely. In practice, many criminal provisions in commercial laws are rarely enforced and often used as leverage rather than justice. The criminalisation of cheque dishonour alone has produced over 40 lakh cases and a significant share of court pendency. Excessive microspecification, disproportionate penalties, low conviction rates, and prolonged judicial delays together create a system that penalises compliant businesses while rewarding evasion.
Absence of a Single Source of Regulatory Truth
The sixth and final regulatory gap is the lack of a single, authoritative source of truth. Transparency and fairness require a unified digital database of all Acts, rules, and enforceable instruments, with every compliance clearly linked to its statutory authority. In the absence of such clarity, entrepreneurs — particularly MSMEs — often face uncertainty and inconsistent enforcement. A live, comprehensive database, backed by a government guarantee that no unpublished obligation is enforceable, is crucial for establishing trust-based governance.
Jan Vishwas Siddhant: Reframing Governance Through Trust
The Jan Vishwas Siddhant proposes a structural shift in how India governs business. Except in critical areas such as national security, public safety, health, and the environment, licences would be replaced with perpetual self-registration. The default principle would shift to “everything is permitted unless explicitly prohibited.” Inspections would become risk-based, randomised, and largely third-party. Penal provisions would be decriminalized and made proportionate; regulatory changes would follow consultation with fixed transition timelines, and filings would be fully digitized. IndiaCode, integrated with the e-gazette, would function as the single source of truth, supported by annual regulatory impact assessments.
Why This Matters for Jobs and Growth
Indian entrepreneurs already face market risk, capital constraints, skill shortages, and social scepticism. Adding regulatory overload explains why, despite over six crore enterprises, only a small fraction achieve meaningful scale. The prevalence of small, capital-starved firms is the outcome of policy design, not culture. By shifting from control to trust, Jan Vishwas can unlock entrepreneurship, accelerate non-farm job creation, and transform citizens from subjects into stakeholders — laying the foundation for sustained economic growth driven by enterprise and innovation.
This article is based on an OpEd ‘From Licence Raj to Jan Vishwas, what we need to set our entrepreneurs free’ by Mr.Manish Sabharwal in the Indian Express on December 13th.
