Rules for growth

India needs fewer and simpler regulations

The International Monetary Fund’s (IMF’s) new G20 report on strong, sustainable, balanced and inclusive growth (SSBIG) puts regulatory and institutional reform at the centre of the growth challenge. The report estimates medium-term G20 growth at only 3 per cent, close to its weakest level since the SSBIG framework was launched in 2009. About half the G20 advanced economies and nearly three-fourths of the emerging-market economies face growth constraints from overly restrictive regulations on labour markets, product markets, or consumer markets. For India, this is particularly relevant even as the economy grew 7.8 per cent in the first quarter this financial year (April-June), while investment rose 11.9 per cent compared to 5.8 per cent in the same quarter last year. As the IMF notes, in G20 emerging markets, inadequate regulatory and institutional frameworks themselves are significant barriers to private and public investment. The report identifies underdeveloped capital markets, weak public-investment management, and deficiency in governance and institutional quality among the most important impediments to investment. It also highlights “intrajurisdictional” barriers, differences in business regulations, professional licensing, internal trade rules, labour mobility, and conditions for firm growth, which can fragment otherwise large domestic markets.

 

This has particular resonance for India’s federal structure. A company may encounter different approvals, licences, inspections and procedures across central, state and local authorities. Such fragmentation raises the cost of scaling up, particularly for micro, small and medium enterprises. Recent news reports show that states had begun reforms across 23 areas identified by the Centre’s Task Force on Compliance Reduction and Deregulation, with progress being digitally monitored and best practices shared across states. The Centre has also made meaningful progress. One such measure was the Jan Vishwas (Amendment of Provisions) Act, 2026, which amended 784 provisions across 79 Central Acts and decriminalised 717 provisions, replacing criminal action for many minor and technical violations with more proportionate mechanisms. The broader compliance-reduction exercise had reduced more than 47,000 compliances by November 2025 through simplification, digitisation, decriminalisation, and removing redundant requirements. These are welcome moves towards a trust-based regulation.

 

The IMF’s arguments strengthen the case for continuing this effort. It finds that liberalisation can improve resource allocation, although its benefits may be uneven across regions, sectors and workers. Importantly for an economy entering an artificial intelligence (AI)-intensive phase, the report finds evidence that market-friendly telecommunication regulation can encourage information and communications technology (ICT) investment and technology diffusion, strengthening the foundations for technologies such as AI. The next step, therefore, should be to create an enabling environment for sustained investment and its translation into higher productivity and job creation, while simplifying licensing and inspections, improving coordination across states, strengthening contract enforcement, and improving public investment management. Equally important is timely implementation, as the IMF notes that delays in implementing necessary structural reforms, alongside policy-related impediments, remain key constraints for medium-term growth. Hence, India’s objective should not simply be to have fewer rules, but also clearer regulations that are less prone to frequent tinkering and easier to comply with.