Blitz Bureau
NEW DELHI: For a country that prides itself on climbing global ease-of-doing-business ladders and dismantling inspector raj legacies, India is facing an uncomfortable paradox: the old licence raj is back — only this time, it is digital, decentralised and far more opaque.
On paper, India has never been easier to do business in. Company incorporation can be completed online in days, tax filings are digitised, customs clearances are faster, and single-window systems promise seamless approvals. Yet, ask entrepreneurs, manufacturers or even large corporates, and a different story emerges — one of compliance overload, overlapping regulators and perpetual fear of inadvertent violations.
The digitalisation of governance was meant to reduce friction. Instead, it has often multiplied touch points. Every ministry, regulator and state authority now operates its own portal, dashboard, reporting format and deadline. A mid-sized manufacturing firm today must routinely comply with filings under GST, income tax, labour codes, environmental norms, pollution boards, factory inspectors, local municipal rules, electricity regulators, fire safety authorities and sector-specific regulators — many of them demanding similar data in different formats, on different platforms, at different times.
The problem is not regulation per se. Modern economies require regulation. The problem is regulatory layering without coordination. Instead of simplifying compliance, digitisation has enabled regulators to demand more data, more frequently, with little regard for cumulative burden. Automation has made it easier to issue notices, flag discrepancies and impose penalties — often without context or human discretion.
This has quietly altered the risk calculus for businesses. Compliance is no longer about intent or outcomes but about procedural perfection. A missed upload, a mismatch between portals or a delayed response to an auto-generated notice can trigger penalties, inspections or prolonged litigation.
For smaller firms without deep compliance teams, this acts as a hidden tax — diverting time, capital and managerial bandwidth away from growth.
Ironically, India’s success in improving formalisation — through GST, digitised payments and real-time reporting — has also widened the regulatory net. Firms that once operated below the radar are now fully visible, but the state has not recalibrated its regulatory philosophy to match this new transparency. The result is a system that punishes error rather than encourages compliance.
Overlapping jurisdictions exacerbate the problem. Central ministries issue rules that states interpret differently. Environmental, labour and safety norms often overlap, leading to multiple inspections for the same issue. Quality Control Orders, introduced to improve standards, frequently add another approval layer without strengthening domestic testing infrastructure. Businesses are left navigating not one regulator, but many — each operating in silos.
This digital licence raj carries macroeconomic costs. It discourages risk-taking, delays capacity expansion and weakens India’s manufacturing competitiveness at a time when global supply chains are looking for alternatives to China. Multinationals may praise India’s market size and political stability, but regulatory unpredictability remains a persistent concern in boardrooms.
The solution is not deregulation, but smarter regulation. India needs a compliance philosophy shift — from policing to partnership. Regulators must share data across departments, harmonise reporting requirements and limit retrospective rule changes.
Sunset clauses for regulations, risk-based inspections and a genuine single-window system — where approvals are consolidated, not merely aggregated — are essential.