The Republic of Trust: India’s New Covenant with its Builders

India’s regulatory architecture is a constant story of evolution, one that grew out of the circumstances of a young nation attempting to stabilise itself after a long period of colonial extraction. In the beginning, it reflected a belief that the state needed to guide development in an environment marked by scarcity, uneven institutional capacity, and deep uncertainty. Over time this approach created a dense network of approvals, inspections, and procedural requirements that shaped how enterprise took root. Even as liberalisation in 1991 removed the most visible controls, the habits built over decades remained, and the regulatory state continued to grow through a thousand smaller processes distributed across jurisdictions. These systems were not conceived as barriers, but as they accumulated they introduced frictions that today weigh most heavily on the small and mid-sized businesses that sit at the center of India’s economic aspirations.

Digitizing Dysfunction

“The regulatory state didn’t disappear with liberalisation; it just dispersed into a thousand invisible frictions”

Liberalisation dismantled the large industrial apparatus but did not unwind the administrative instincts that had formed around it. The supervisory posture simply migrated to new domains. Environmental clearances, fire inspections, periodic renewals, municipal permits, sector-specific filings, and a growing array of digital submissions became the new expressions of an older logic. The Licence Raj no longer appeared in the form of a single ministry with sweeping authority but in a distributed set of obligations that touched almost every aspect of operating a business. Rules accumulated faster than they disappeared, since removing a requirement seemed riskier than letting it persist. Digitisation amplified these tendencies. Uploading a document made it easier for agencies to request more documents, automated reminders made it easier to create filings, and online portals made it easier for regulation to expand without appearing to do so. The interface changed but the mentality behind it remained.

Old Logic, New Portals

It is in this context that the reforms of the last several years take on greater meaning, because they represent the beginning of a reorientation in the way the state conceives of its economic role. India’s small and mid-sized enterprises, which number over 60 million, remain burdened by three structural costs . The first is capital, as borrowing can cost from 12 percent to more than 40 percent per annum, numbers that constrain risk-taking and force entrepreneurs to adopt defensive strategies. The second is logistics, as moving goods across India still costs close to 14 percent of GDP, a figure that reflects both the complexity of the country’s geography and the pace of infrastructure development. The third is compliance; in sectors such as real estate and infrastructure, the cumulative weight of inspections, certificates, sequencing requirements, and administrative ambiguity can absorb a fifth or even a quarter of total project expenditure.

The Structural Reset

“We are finally swapping the anxiety of control for the architecture of trust.”

The state has begun to address these constraints; one example is the redefinition of the MSME category. By raising the turnover thresholds from Rs. 50 crore to 100 crore for small enterprises and from Rs 250 crore to 500 crore for medium enterprises, the government allowed thousands of firms to continue operating within a lighter compliance system. Audit obligations, environmental reporting, labour filings, and procurement eligibility often change once a firm crosses specific financial ceilings. Increasing those ceilings gives firms room to grow without immediately triggering heavier regulatory demands.

Labour reforms mark another significant shift. For decades, 29 separate laws governed India’s labour market, contributing to an environment in which 42 percent of manufacturing workers are on temporary contracts. These patterns did not arise from a preference for informality but from the cost of crossing compliance thresholds. The consolidation of these laws into four comprehensive labour codes, the increase of applicability thresholds from 100 to 300 employees, the introduction of flexibility in retrenchment, and permission for women to work night shifts all signal a state that is beginning to understand that employment growth requires predictability and flexibility alongside worker protections. Implementation will be stage by stage across the states, but the framework itself represents a considerable institutional evolution.

Quality Control Orders (QCOs) provide another window into the reform process. They were created to ensure product quality but over time became a constraint for MSMEs because of bottlenecks in testing capacity. Certification delays often lasted up to 12 weeks, and with only 3,000 BIS personnel overseeing thousands of products, mandatory testing for inputs pushed firms toward a narrow bench of certified suppliers, thereby increasing costs throughout the value chain. The decision in late 2025 to modify or withdraw 76 QCOs, many relating to essential inputs such as polyester yarn, terephthalic acid, chemical intermediates, aluminum, nickel, tin, and refined zinc, is expected to reduce costs by 8 to 12 percent in downstream sectors. The Ministry of Steel’s suspension of 55 additional QCOs strengthens this shift and signals an ongoing willingness to recalibrate regulation based on data and industry realities.

The financial regulatory environment has seen a similar transformation. The Reserve Bank of India undertook a rationalisation effort that consolidated more than 9,000 circulars into 238 coherent, function-wise directions. This reduces interpretive divergence, strengthens supervisory clarity, and simplifies compliance for banks and NBFCs. It is not a reform that will appear on the front pages of newspapers, yet it represents the type of institutional housekeeping that underpins more efficient markets.

But, Lot’s More To Be Done…

Even with these reforms, institutional challenges remain. The average time to enforce a contract in India is 1,445 days, an invisible cost that shapes credit decisions, supply chain planning, and willingness to take risks. The expansion of commercial courts, the growing use of online dispute resolution, and the demonstrated effectiveness of specialised tribunals such as the NCLT all point to an emerging recognition that ease of justice and ease of business cannot be separated.

Speed has become a central theme of the reform agenda as delayed shipment and lingering permits depress investment, weaken confidence, and inflict more harm than any formal fee. India is increasingly moving toward tighter service timelines, T + 1 processing, and the idea that approvals should be automatic unless objections are explicitly raised. These shifts signal an administrative culture that is beginning to align with the tempo of a modern economy.

Digitisation is also evolving. The next stage will require re-engineering processes so that information need only be provided once and can then flow through the system without repeated input from citizens or firms. Countries such as Estonia have shown how explicit guarantees of data reuse transform interactions with the state. India is moving toward unified business identifiers, interoperable registries, and integrated digital platforms that set the foundation for similar transformation.

From Suspicion to Trust

A more forward-looking reform will involve treating regulation as a dynamic instrument rather than a permanent fixture. This will require the introduction of mandatory sunset clauses, with every new rule expiring after five years unless a clear cost–benefit assessment justifies its continuation. Such a discipline prevents the quiet accumulation of procedures that once served a purpose but no longer do, and it forces policymakers and administrators to revisit the logic underlying each regulatory demand.

Within this broader landscape, the Jan Vishwas framework marks a philosophical turning point. By shifting minor offenses from criminal penalties to civil fines, by requiring regulatory impact assessments, and by introducing risk-based inspections carried out by accredited third parties, Jan Vishwas moves India away from preemptive supervision and toward a system based on proportion, predictability, and trust.

An Architecture for Scale

India’s ambitions for the coming decades are considerable. The country aims to raise manufacturing from 15 percent to 25 percent of GDP and to grow its overall economy nearly tenfold in the next 20 years. Such goals require not only infrastructure and capital but an institutional environment that rewards initiative and enables scale.

The evolution of India’s regulatory system is still unfolding, yet its direction is increasingly clear. The country is moving from a supervisory framework shaped by the anxieties of an earlier era to an institutional architecture built for confidence, scale, and opportunity.