Ease of doing business

Also called: EoDB · Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Class 8, Ch 7 "Factors of Production"; Class 9, Ch 9 "The Price Puzzle: What Drives the Market"

Meaning

Ease of doing business (EoDB) means how simple the rules and government processes make it to start a business, run it and close it. It matters because the 1991 reforms removed most controls on starting a firm. Today, most of the cost and delay comes from the rules on running and closing it, so EoDB is now at the centre of India's reform agenda.

Explanation

Three stages of a firm's life

• Start: permissions, registrations, land and building approvals. Before 1991, industrial licensing (government permission to set up, expand or close a unit) was the biggest barrier here. The Statement on Industrial Policy of 24 July 1991 cut compulsory licensing to 18 industries. Today only 5 remain.
• Run: inspections, filings, taxes, labour rules and environmental approvals. Most of the remaining burden sits here, and much of it is with states and ministries.
• Close: the rules and delays involved in shutting a firm down. A hard exit also stops people from starting firms, because they fear getting stuck.

What makes EoDB rise or fall

• Compliance burden (the time and money a firm spends on licences, filings and procedures):
• many separate filings → a firm needs staff or consultants to handle them
• a big firm can afford this, a small firm cannot

• so the burden falls hardest on small firms

• Criminal penalties in business laws:

• a clerical slip can lead to a criminal case
• owners fear harassment by inspectors

• so firms stay small or informal to avoid notice

• Number of offices to visit: a single-window clearance (one interface for all approvals) saves time compared with visiting many offices.

• Regulatory cholesterol: too many outdated rules build up over time. Like cholesterol in the arteries, they clog business, raise costs and hold back investment and jobs.
• How rules work in practice: a good law on paper helps little if public services are slow or officials act unpredictably.

How EoDB is measured: rankings and indices

• World Bank Doing Business (DB): ranked countries on business rules. It was discontinued in September 2021, after data irregularities were reported inside the World Bank in June 2020 and an investigation followed [9].
• Business Ready (B-READY), from 2024 [9]:
• 3 pillars: Regulatory Framework, Public Services, Operational Efficiency [9].
• 10 topics that follow a firm's life cycle, with about 1,200 indicators per economy [9].
• The 2024 edition covered 50 economies. It also looks at three cross-cutting themes: digital adoption, environmental sustainability and gender [9].
• B-READY 2025 has been released [9].

• The key shift: DB mainly checked what the rules said. B-READY also checks public services and how well rules work in practice.

• Worked example: reading a rank change

• India's rank in DB2015 was 142. In DB2020 it was 63.
• Gain = 142 − 63 = 79 places.
• A lower rank number means an easier business climate.

In India

• 1991 and after: controls on entry removed
• Licensing was cut to 18 industries in 1991. Only 5 remain today: alcoholic drinks, tobacco products (cigars and cigarettes), electronic aerospace and defence equipment, industrial explosives, and specified hazardous chemicals.
• Industries reserved for the public sector fell from 17 to 8. Today only atomic energy (specified) and railway operations remain.

• The SSI reservation list (goods only small-scale industries could make) was abolished in 2015.

• World Bank rank: India rose from 142 (DB2015) to 63 (DB2020).

• BRAP (Business Reform Action Plan): run by DPIIT (Department for Promotion of Industry and Internal Trade). It ranks states and UTs on the reforms they carry out [8].
• Its areas include single-window clearance, land, labour, inspections, taxation and environmental approvals [8].
• District BRAP takes the same idea down to district level [8].

• Why it matters: land, building permits and inspections are largely state matters, so competition between states pushes reform where the Centre cannot act alone.

• National Single Window System (NSWS):

• Launched by DPIIT in 2021. It grew out of the Budget's idea of an Investment Clearance Cell [7].
• It links 32 Central Departments and 32 State Governments and gives access to over 698 central and 7,435 state approvals [7].
• It has granted over 8,29,750 approvals since launch [7].

• All proposals needing approval under the FDI approval route now go through NSWS [7].

• Compliance burden: ORF-TeamLease (2022) counted about 69,000 compliances and 26,000 imprisonment clauses for businesses.

• Decriminalisation:
• Jan Vishwas (Amendment of Provisions) Act 2023 decriminalised 183 provisions in 42 Central Acts handled by 19 Ministries/Departments [NCERT scaffold][2].
• Jan Vishwas Bill 2025: introduced on 18 August 2025 and sent to a Select Committee. It proposed to amend 355 provisions in 17 laws: 288 to be decriminalised for ease of doing business and 67 to be amended for ease of living [3].
• Jan Vishwas Bill 2026: introduced on 27 March 2026 in place of the 2025 Bill. It amends 80 Central Acts [2]. It passed the Lok Sabha on 1 April 2026 and the Rajya Sabha on 2 April 2026 [2]. Presidential assent is not confirmed in the source; verify.

• Main features of the 2026 Bill [2]:

  • a first breach gets an advisory, a warning or an improvement notice; civil penalties come only for repeat breaches
  • imprisonment is replaced by civil penalties in sectors such as drugs, highways and copyright
  • adjudicating officers fix penalties and appellate authorities hear appeals, so cases need not go to criminal courts
  • fines rise automatically by 10% of the minimum amount every 3 years. Example: a minimum fine of ₹10,000 rises by ₹1,000 every 3 years, to ₹11,000 after year 3 and ₹12,000 after year 6 [2].

• Economic Survey 2024-25:

• Its Chapter 5 is titled "Medium Term Outlook: Deregulation Drives Growth" [6].
• It calls systemic deregulation the main domestic lever for growth. It asks for a "deregulation stimulus" while India can still gain from its demographic dividend (the growth boost from a large working-age population) [5].

• It gives states a three-step process: find areas to deregulate, compare their rules with other states and countries, and estimate what each rule costs firms [5].

• High-Level Committee for Regulatory Reforms (Budget 2025-26): it will review all non-financial-sector regulations, certifications, licences and permissions, and report within one year [4]. The source gives no update on its current status; verify.

Don't confuse with

• Delicensing / 1991 reforms: these removed controls on entering an industry. EoDB is broader. It also covers the rules on running and closing a firm, where most of the burden now lies.
• World Bank Doing Business vs B-READY: DB was discontinued in September 2021. B-READY (from 2024) is its replacement, with 3 pillars and 10 topics, and it also measures public services and how well rules work in practice [9].
• BRAP vs World Bank rankings: BRAP is run by DPIIT and ranks Indian states/UTs [8]. The World Bank indices rank countries.
• Ease of doing business vs ease of living: in the Jan Vishwas Bill 2025, 288 provisions were to be decriminalised for ease of doing business, while 67 were to be amended for ease of living (citizens' daily dealings with the state) [3].

Prelims Hooks

• India's World Bank Doing Business rank rose from 142 (DB2015) to 63 (DB2020). Doing Business was discontinued in September 2021. B-READY (2024) replaced it with 3 pillars, 10 topics and 50 economies in its first edition [9].
• BRAP is run by DPIIT, not the World Bank, and ranks states/UTs. DPIIT has also launched a District BRAP [8].
• NSWS (2021) is a DPIIT platform that links 32 Central Departments and 32 State Governments. All FDI approval-route proposals go through it [7].
• Jan Vishwas Act 2023: 183 provisions, 42 Central Acts, 19 Ministries/Departments. Jan Vishwas Bill 2026: 80 Central Acts, with fines rising 10% every 3 years [2].
• "Regulatory cholesterol" and the "deregulation stimulus" come from the Economic Survey 2024-25. The High-Level Committee for Regulatory Reforms comes from Budget 2025-26 and covers only non-financial regulations [4][5].
• Trap: compulsory licensing today covers 5 industries. Drugs and pharmaceuticals are no longer on the list, even though the NCERT list still shows them.

Mains Points

• 1991 freed entry, but running a business is still heavily regulated.
• Licensing and reservation are almost gone.
• But about 69,000 compliances and 26,000 jail clauses (ORF-TeamLease, 2022) still raise costs and push firms to stay small or informal.

• So the Economic Survey 2024-25 argues that the next growth push must come from deregulation, much of it at state level and aimed at MSMEs [5].

• Decriminalisation builds trust, but penalties must still deter real harm.

• Jan Vishwas replaces jail with civil penalties and gives warnings for a first breach. This cuts harassment by inspectors and the load on courts [2].

• Trade-off: in areas such as drugs or the environment, penalties must still stop real harm. That is why fines are revised every 3 years and appeals are provided for [2].

• Cooperative-competitive federalism drives EoDB (GS-II link).

• BRAP, District BRAP and NSWS push states to compete on reforms [7][8].
• B-READY looks at public services and operational efficiency [9]. So India must improve how rules work on the ground, not just what the laws say.

Related concepts

• Dereservation
• Single-window clearance
• Compliance burden
• Regulatory cholesterol

Read more

• 1991 and after: delicensing, dereservation and the unfinished deregulation agenda