The Union government is likely to unveil a national deregulation commission by May this year to recommend a set of next-generation economic reforms aimed at easing rules, speeding up approvals, and dismantling barriers faced by businesses, especially smaller enterprises, an official with knowledge of the matter said.
The proposed commission, being conceptualised by a task force led by Union cabinet secretary TVS Somanathan, will suggest policies to roll out an “ease of doing business 2.0” plan to crank up growth amid challenging global conditions, an official said on condition of anonymity.
Aside from Somanathan, the task force comprises key officials from the Niti Aayog and the Prime Minister’s Office, HT has learnt.
The development comes days after Prime Minister Narendra Modi said that his government would constitute a deregulation commission to cut the role of the state in governance. “It is my conviction that there should be less interference of the government in society. For this, the government is also going to constitute a deregulation commission,” he said at an event on February 16.
The task force has been holding meetings since January and has identified key reforms, including cutting down on so-called no-objection certificates from multiple authorities, and fully digitising business approvals with a focus on reviewing state-level regulations, the official said.
According to inputs prepared by the task force, states with less-onerous compliances for businesses and faster official clearances have been able to attract the most investments and clocked better growth and employment rates, added the official.
The move also sets in motion key recommendations for freeing up enterprises, especially small and medium businesses, made in the government’s Economic Survey 2024-2025 tabled in Parliament on the eve of the Union Budget’s presentation on Feb 1.
The survey highlighted burdensome regulations that were still stifling growth. “It outlined a three-step process to unclog and systematically review state-level frameworks to increase cost-effectiveness, which will make them investment friendly,” the official said.
A tough global trade environment, lumbering geopolitical tensions, US President Donald Trump’s policy of reciprocal tariffs and reshuffling of supply lines present both challenges and opportunities for India, the official said.
“To benefit from the opportunities, the country needs to update regulatory frameworks in different sectors, which will roll out ‘ease of doing business 2.0’. This will be the key mandate,” the official cited abovesaid, asking not to be named.
“The faster economic growth that India needs is only possible if the Union and state governments continue to expand reforms that allow small and medium enterprises to operate efficiently and compete cost-effectively,” the Economic Survey had stated.
The focus of “ease of doing business 2.0” will be on micro, small and medium enterprises, or the MSME sector, which accounts for over a third of manufacturing output (35.4%).
The MSME sector is also a large provider of employment and makes up nearly 31% of the country’s gross value added or GVA, a measure of national income.
Asia’s third-largest economy needs a burst of growth-spurring policies amid slower economic expansion. India’s economy expanded by 6.2% in the October-December quarter on increased government spending and higher rural consumption, data released last week showed.
Yet, manufacturing growth — key to employment and Atma Nirbhar (self-reliance) — remained subdued and the overall growth in GDP was below peak quarterly growth rates seen in the previous three years.
Smaller firms still have a lot of incentives to “remain small”, which allows them to escape cumbersome rules and operate under the regulatory radar, resulting in fewer jobs being added, the official said.
A recent assessment of states, the Business Reform Action Plan (Brap), of the department for promotion of industry and internal trade showed that states that deregulated compliances in the investment stage saw faster industrialisation.
“Small and medium enterprises are the real nuts and bolts of the economy. Their growth feeds into the country’s overall growth. They need to be competitive, cost-effective and efficient,” said NR Bhanumurthy of the Madras School of Economics.
Recent initiatives that have eased processes for such enterprises include the Udyam registration portal that speeded up nearly 40.6 million registrations till July 2024. “This played a key role in formalising MSMEs by providing a simple, online and free registration process based on self-declaration,” the official cited in the first instance said.