States chase reforms away from limelight as deregulation gathers pace

States are accelerating deregulation and ease-of-doing-business reforms, with over three-fourths of the Centre's first-phase compliance reduction measures already implemented

State governments are quietly pursuing business reforms, taking cues from the Centre’s idea that government getting out of the way will help to unlock the untapped growth potential of India’s economy. 

States undertook the first round of reforms in 23 specific areas flagged by the Task Force on Compliance Reduction and Deregulation, set up in January last year under Cabinet Secretary T V Somanathan, said two persons familiar with the development. 

Twelve Union secretaries are monitoring the progress, which is tracked digitally in real time, to identify any possible bottlenecks as well as share the best practices among states, said one of the persons quoted above. 

The 23 measures fall in five broad areas — land, building and construction, labour, utilities, and permissions and overarching priorities. 

They translated into close to 830 specific steps to be taken by states on reform and deregulation. As of January this year, more than three-fourths have been achieved, said the person quoted above. 

“That achievement also includes implementation in states ruled by parties not in the National Democratic Alliance (the formation in power at the Centre and in many states). That has been made possible because these reforms are implemented away from the limelight and states recognise the link between ease of doing business and development,” said the person.

The following has been the record of non-NDA governments.   

The Jharkhand government, run by the Jharkhand Mukti Morcha, for example, has implemented 11 of the 23 reforms while seven were under implementation as of January, showed the Centre’s Economic Survey 2025-26. 

Similarly, the West Bengal government, when it was run by the Trinamool Congress, implemented 10 of the 23 while six were under implementation, showed the Economic Survey. 

Tamil Nadu has executed 19 reform action points while the rest are not applicable to the state, showed the Economic Survey. Kerala has done so with 15, and two were under implementation as of January while the rest are not relevant for the state, showed the Economic Survey. 

The task force seeks to remove archaic and redundant compliance requirements and streamline the regulatory architecture while enabling consistency and predictability across states. Digitisation and integrating states’ regulatory ecosystems with the national single-window system are also priorities of the task force. 

The action points include simplifying and digitising the process of land-use change, amending building regulations to reduce land loss in industrial parks, giving third parties a larger role in building approvals, removing prohibitions on women from working in certain “hazardous” industries, allowing night-time employment for women in all occupations, and simplifying the approval and renewal of factory licences. 

States are also encouraged to go beyond the template of reforms. 

The Chhattisgarh Assembly, where the Bharatiya Janata Party has a majority, on July 16 passed the Ease of Doing Business Act to adopt a risk-based approval system for businesses. Under this, low-risk businesses will receive faster approvals and simplified compliance, while larger industries will be given deemed approvals if applications are not processed within the prescribed time. 

The state government said in a statement that the framework ensured that smaller businesses were not subject to the same regulatory requirements as large industrial establishments. 

Chief Minister Vishnu Deo Sai told Business Standard that the state government had committed itself to creating a simple, transparent, and investment-friendly ecosystem for industry. 

Other states too are pursuing deregulation. 

The Karnataka Decriminalisation (Amendment of Provisions) Act, 2025, removed criminal penalties from 278 provisions in 13 pieces of legislation, the then chief minister, Siddaramaiah, said in his 2026-27 Budget speech on March 6. 

Karnataka has also set up a single-window system for clearances. The state, in partnership with Microsoft, has built a unified platform offering over 100 services across 30 departments, Siddaramaiah had said that day. 

The Maharashtra Jan Vishwas Act, 2025, sought to decriminalise and rationalise penalties for minor offences. Maharashtra has launched the MIDC Industrial Land Application & Allotment Portal, a portal for transparently allotting industrial land through Maharashtra Industrial Development Corporation. These platforms aim to reduce delays and discretion in approval. 

Tamil Nadu has introduced a single-window system for approval on layouts and building plans in accordance with the state’s Interim Budget of 2026-27. 

States have also made several attempts to address payment delays small businesses face. Tamil Nadu has launched its own TN TReDS (Tamil Nadu Trade Receivables Discounting System) to enable quicker payments to small businesses for the services they provide, while Andhra Pradesh has said it will use the TReDS platform to discount bills in line with the Centre’s policy. 

Andhra Pradesh has captured this shift in the state’s FY27 Budget speech of Payyavula Keshav, state finance minister, on February 14. 

“We no longer talk of Ease of Doing Business. We now talk about Speed of Doing Business.” 

Besides making rules, states are agencies in putting them into effect. They have the exclusive authority on subjects such as land, buildings, water, and local trade and commerce. Along with the central government, they can also concurrently regulate subjects like labour welfare and electricity. 

There is competitive energy building among states around deregulation and business reform, said Rishi Shah, partner and economic advisory services leader at Grant Thornton Bharat. 

Chhattisgarh’s Ease of Doing Business Act is one visible manifestation of a broader shift, Shah said. The Centre’s Business Reform Action Plan, together with its broader push towards deregulation and regulatory simplification, has reinforced this momentum. 

“Increasingly, investors evaluate not just incentives but how quickly they can deploy capital, secure approvals and commence operations. States recognise that regulatory efficiency, faster decision making and policy predictability are becoming as important as fiscal incentives in attracting investment” said Shah. 

Competition for investments at state level has now shifted from incentives to ease, speed and certainty of doing business, he added.