India Emerging as a Global Business Powerhouse, Reforms, Details

In the past decade, India is emerging as a global business powerhouse as it has taken major steps to improve its business environment. Through regulatory reforms, digital governance, and financial sector changes, the government has made it easier to start and run businesses in the country.

These reforms have strengthened investor confidence and encouraged entrepreneurship. The number of active registered companies increased from 1.55 lakh in 2020-21 to around 1.98 lakh in 2025-26, reflecting the growing strength of India’s business ecosystem and its rising position in the global economy.

Institutional Reforms Supporting Businesses

India’s emergence as a global business powerhouse is driven by regulatory simplification, digital governance, and financial sector reforms that collectively improve the Ease of Doing Business.

Ease of Doing Business

Improving the Ease of Doing Business (EoDB) has become a key policy priority in India. The government aims to create a business environment that is transparent, efficient, and predictable.

Several measures have been taken to achieve this goal:

• Simplifying rules and regulations
• Reducing unnecessary compliances
• Promoting digital governance
• Improving tax systems
• Encouraging investment and entrepreneurship

The Union Budget 2026-27 also introduced reforms to promote digital trade, reduce compliance burden, and improve tax certainty for businesses.

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Strengthening the Startup Ecosystem

The Startup India initiative has played a major role in promoting innovation and entrepreneurship in India. The initiative seeks to build a robust and inclusive startup ecosystem that fosters innovation, drives sustainable economic growth, and generates large-scale employment opportunities across the country. Startups recognised by the government receive benefits such as:

• Tax incentives
• Simplified regulatory procedures
• Faster patent and intellectual property approvals
• Support for funding and business growth

As of February 2026, India has more than 2.16 lakh recognised startups, making it one of the largest startup ecosystems in the world.

These initiatives also encourage innovation in areas such as technology, rural development, and research.

Improving Access to Finance

Access to credit is essential for businesses, especially Micro, Small and Medium Enterprises (MSMEs). To support them, the government has introduced several credit guarantee schemes that allow entrepreneurs to obtain loans without collateral.

Important schemes include:

• Credit Guarantee Scheme for Micro & Small Enterprises (CGTMSE): Facilitates credit guarantees for credit support of up to ₹10 crore to Micro and Small Enterprises (MSEs).
• Credit Guarantee Scheme for Startups (CGSS): Supports startups by providing credit guarantees; the revised framework has enhanced guarantee coverage, increasing the maximum limit from ₹10 crore to ₹20 crore per eligible borrower. 
• Credit Guarantee Scheme for Exporters (CGSE): Additional collateral-free credit support of up to ₹20,000 crore to direct and indirect exporter MSMEs.

These schemes reduce risk for banks and make it easier for entrepreneurs to obtain loans. Public sector banks have introduced a Credit Assessment Model (CAM) that uses digital data to evaluate loan applications from MSMEs. This system allows faster and more transparent loan approvals.

Insurance Sector Reforms

The Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Act, 2025 introduces comprehensive reforms by amending the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and Insurance Regulatory and Development Authority Act, 1999. 

The objective is to strengthen policyholder protection, deepen insurance penetration, accelerate sectoral growth, and significantly improve EoDB.

A key reform is the increase in the FDI limit to 100%. The Act promotes EoDB through:

• One-time registration for insurance intermediaries to ensure seamless operations and better service continuity.
• Raising the IRDAI approval threshold for share transfers from 1% to 5%, simplifying compliance.
• Reducing the Net Owned Fund requirement for foreign reinsurers from ₹5,000 crore to ₹1,000 crore, encouraging greater reinsurance participation and capacity in India.

These reforms will attract investment and improve insurance coverage for businesses and individuals.

Trade and Investment Facilitation

The government has introduced several measures to improve trade processes and reduce delays in cargo movement.

Major initiatives include:

• A single digital window for cargo clearances
• Faster customs clearance for goods with no compliance requirements
• Introduction of Customs Integrated System (CIS)
• Use of AI-based risk assessment and scanning technologies
• Increased investment opportunities for foreign investors

These steps improve efficiency in international trade and make India more attractive for global investors.

Regulatory Reforms to Improve Business Environment

• The Reserve Bank of India has simplified its regulatory framework by consolidating thousands of circulars into Master Directions, making regulations easier to understand.
• Similarly, the Securities and Exchange Board of India (SEBI) has simplified rules related to securities markets to improve transparency and compliance.
• The government has taken several steps to make taxation simpler and more predictable:
  • Reduction in penalties for minor offences
  • Decriminalisation of technical tax violations
  • Lower pre-deposit requirement for appeals
  • Simplified prosecution rules

These reforms reduce legal disputes and make the tax system more business-friendly.

Rationalizing Penalty and Prosecution

The government has reduced compliance stress by simplifying penalties and prosecution rules.

• Pre-deposit for appeals reduced from 20% to 10%.
• Companies can update returns even after reassessment by paying 10% additional tax.
• Protection from penalty and prosecution now covers misreporting if full tax and interest are paid.
• Non-production of books, TDS mistakes, and other minor violations now attract fines instead of criminal charges.
• Many technical penalties are now treated as fees.
• Simple imprisonment is limited to 2 years and can be converted to a fine.
• Non-disclosure of foreign assets below ₹20 lakh (from 1.10.2024) is exempted.

Trust-Based Customs System

Trust-based systems allow trusted businesses to get faster customs clearance with fewer checks, making trade easier.

• Deferred duty payment: Importers can clear goods first and pay customs duty later (“Clear first, Pay later”).
• Authorised Economic Operator (AEO): Trusted companies involved in international trade get faster customs clearance and fewer inspections.
• Longer duty payment time: Duty deferral period for Tier-2 and Tier-3 AEOs increased from 15 days to 30 days.
• Facility for manufacturer-importers: Eligible manufacturer-importers can also use duty deferral, encouraging them to become AEOs.
• Advance ruling validity increased: Customs advance ruling validity extended from 3 years to 5 years, helping better business planning.
• Faster cargo clearance: AEO businesses get preferential treatment in cargo clearance.
• Less verification for trusted importers: Risk-based systems reduce inspections for reliable traders.
• Simplified warehousing system: Self-declarations, electronic tracking, and risk-based audits reduce delays and compliance costs.

Jan Vishwas Act

• The Jan Vishwas (Amendment of Provisions) Act, 2023 removed criminal penalties for 183 minor offences across 42 laws.
• Minor and technical violations now attract monetary penalties instead of criminal punishment.
• The proposed Jan Vishwas Bill, 2025 aims to further decriminalise several provisions to reduce regulatory burden and promote a more business-friendly governance system.

Insolvency and Bankruptcy Reforms

• It provides a clear and time-bound process to resolve financially stressed companies.
• Its main objective is to revive companies in financial distress instead of letting them shut down.
• Since its introduction, 3,865 companies have been rescued (till Sept 2025) through resolution plans, settlements, or withdrawals.
• Creditors have recovered about ₹3.99 lakh crore, which is around 170% of liquidation value.
• By improving recovery and transparency, IBC increases credit availability and investor confidence.

The Securities Markets Code, 2025 (SMC) 

• The SMC Code, 2025 replaces the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the Depositories Act, 1996, thereby consolidating the uneven laws governing India’s securities markets. 

Quality Control Orders (QCOs)

Quality Control Orders are rules issued by the government that make quality standards mandatory for certain products.

• QCOs ensure that products meet required quality and safety standards.
• By December 2025, 143 QCOs covering 723 products have been notified, compared to 214 products in 2019.
• Better quality standards help Indian products compete in global markets and attract investment.

Regulatory Compliance Burden (RCB) Initiative

• Launched in 2020, the RCB initiative seeks to ease regulatory pressures on businesses and citizens through a comprehensive self-review by Central Ministries, Departments, and States/UTs. 
• Over the past five years, more than 47,000 compliances have been reduced.

Minimum Alternate Tax (MAT)   

Minimum Alternate Tax (MAT) enhances the EoDB in India by creating a fair, transparent tax structure that ensures profitable companies pay a minimum tax. Recently, significant rationalization measures have been proposed under the MAT framework in the Union Budget 2026-27.

• The MAT rate is proposed to be reduced from 15% to 14% to simplify taxation.
• Non-residents choosing presumptive taxation will be exempt from MAT, reducing compliance burden.
• Share buybacks will be taxed as capital gains in the hands of shareholders.
• Companies can set off MAT credit up to one-fourth of their tax liability under the new tax regime.
• Treating MAT as a final tax simplifies the tax structure and improves ease of doing business.

Labour Reforms

• Simplified labour laws: 29 central labour laws have been merged into 4 Labour Codes, making rules easier to understand and follow.
• Faster approvals: Permission for factory construction or expansion must now be given within 30 days (earlier it could take up to 90 days).
• Easier compliance: Businesses now have single online registration, a single return, and a single all-India licence valid for 5 years, reducing paperwork.
• Relaxed rules for small contractors: Contractors employing fewer than 50 workers do not need a licence.
• Less strict penalties: Minor violations now attract monetary fines instead of criminal penalties, and businesses get 30 days to fix issues before legal action.
• Greater flexibility for companies: The threshold for lay-offs, retrenchment, and closure has been increased to 300 workers, allowing businesses to operate more flexibly.

GST Reforms

• Simplified tax slabs: GST reforms simplified the structure mainly into two slabs :  5% and 18%, replacing the earlier multiple slabs (5%, 12%, 18%, 28%).  
• Reduction in tax rates: Tax rates were reduced in some sectors, lowering the overall tax burden on businesses.
• Lower compliance and transaction costs: Simpler tax rules reduce paperwork, time, and cost involved in tax compliance.
• Improved affordability and entrepreneurship: Rationalisation of tax rates improves affordability and supports new businesses.
• Correction of inverted duty structure: Tax imbalances in sectors such as textiles and fertilisers have been corrected.

GST simplification has expanded the tax base from 60 lakh taxpayers in 2017 to more than 1.6 crore in 2026, indicating greater formalisation of the economy.