Next Generation Reforms Required for Leapfrogging India’s Growth

In a world fraught with uncertainty, fragmentation, and shifting global economic alignments, India stands at a critical juncture. The global trading order, once predicated on integration and the free flow of goods, capital, and people, now teeters on the edge of reversal. Geo-economic fragmentation is no longer a theoretical risk but a lived reality. India, however, has the opportunity not merely to weather this storm, but to leapfrog into a higher growth trajectory through the next generation of reforms—rooted in domestic empowerment, deregulation, and a steadfast belief in the creative potential of its people and enterprises.

The Vision for Viksit Bharat by 2047

The aspiration to become a Viksit Bharat by 2047, coinciding with the centenary of our independence, demands a consistent growth rate of 8 per cent in real terms over the next two decades. Achieving this is not only desirable—it is essential. But given the increasingly unfavourable global context, the answer lies not in waiting for a benign external environment, but in intensifying our reliance on internal engines of growth.

Shifting Focus to Internal Strengths

This means enhancing economic freedom, dismantling regulatory constraints, and enabling enterprise at the grassroots. India must now decisively transition from reforms aimed at formalisation and digitisation to those centred on systemic deregulation and the promotion of investment efficiency. Otherwise, India risks being trapped at low-middle income levels in the coming years.

Achievements of the First Wave

The first wave of structural reforms—from the Goods and Services Tax to the Insolvency and Bankruptcy Code—laid the foundation for a unified, resilient economic architecture. These reforms, alongside the India Stack, have brought transparency, formalisation, and an unprecedented leap in digital public infrastructure. Yet, the burdens of compliance, inspection, and licensing remain disproportionately high for micro, small and medium enterprises (MSMEs), which are the backbone of employment and innovation. The cost of regulation, particularly for smaller firms, often outweighs the benefits of formalisation, leading many to remain outside the system and thereby forgoing access to institutional finance, skilled talent, and integration into formal supply chains.

The Next Generation of Reforms

The next generation of reforms ought to be about liberating this latent entrepreneurial energy. The goal must be clear: to reduce the cost, time, and uncertainty of doing business in India. This requires a paradigm shift from a mindset of control to one of facilitation. The focus must be on deregulating factor markets—especially land, labour, and building regulations—that affect decision-making across all enterprises. For instance, Indian factory owners often forgo up to 69 per cent of their industrial plots due to outdated setback norms, incurring millions in opportunity costs and lost employment potential. These are not mere administrative nuisances—they are binding constraints on India’s growth.

Guiding Principle for Regulation

As espoused in the Economic Survey 2024-25, the principle of “minimum necessary, maximum feasible” should guide all regulation going forward. Indian businesses—especially MSMEs—must be enabled to allocate their limited managerial bandwidth towards growth and innovation, not compliance paperwork. Likewise, legal safeguards around punitive actions must be codified to ensure transparency, fairness, and the minimisation of discretionary power. Deregulation must not be misconstrued as the removal of all rules, but as a recalibration of the regulatory burden keeping in mind the state capacity for enforcement and the legitimate growth aspirations of entrepreneurs.

The Role of the Private Sector

However, reforms are neither the sole prerogative nor the sole responsibility of public authorities. For India to achieve its development goals, reforms of mind-sets and practices must happen in the private sector too. The private sector must also demonstrate its commitment towards Indian society – one that is based on trust, integrity and long term value creation. They must realise that Corporate Social Responsibility is not distinct from Corporate Responsibility to the Consumer.

Addressing Harmful Trends

Worrying trends such as the increasing sale of junk foods, the promotion of online betting platforms, and quality lapses in sectors such as pharmaceuticals and food safety need to be arrested. A physically and mentally healthy young population serves the need for quality labour in the private sector. Hence, it will not be an act of charity but self-interest on the part of the private sector not to undermine the health of India’s youth with its products and services. This calls for looking beyond short-term gains and broadening the private sector’s ambition to match the scale of the nation’s development aspirations.

Fair Labour Practices

A deeper social compact with Indian society also requires reflection on labour practices and wage structures. Competing on cost efficiency must not come at the cost of fair wages and worker dignity. In the medium to long run, both goals are consistent with one another. Furthermore, building a healthy and productive Mittelstand will also require larger enterprises to play a mentoring role, enabling knowledge transfer, market linkages, and access to working capital. This ecosystem-wide view of value creation, one that transcends balance sheets and quarterly targets, is the cornerstone of sustainable capitalism.

Preparing for Technological Disruption

As Artificial Intelligence and automation begin to alter the contours of employment and productivity, the private sector must also shoulder the responsibility for preparing the workforce. This includes participating in curriculum design, robust on-the-job training, and enabling apprenticeships. The Indian labour force cannot be left to fend for itself against these disruptions alone. Deployment of capital must be sensitive to the needs of India’s demographic, ensuring it is harnessed rather than squandered. The depth and range of deployment of technology is a decision to be made by business leaders and not technologists.

Reimagining Economic and Social Systems

India’s economic destiny will not be charted in isolation from global developments—but it will be determined by the resolve with which we reform ourselves. Change in business practices and policymaking requires broadening our minds and lengthening our horizons. Kinship and network societies are good for social cohesion but they are not scale-friendly because trust does not travel beyond communities. Hence, both commercial practices and compliance policies are premised on low trust and low sanctity of contracts. That has to change for the country to leapfrog to the next level of development.

A Model for Inclusive Development

By unleashing the economic freedom of its people, reimagining the role of the state from regulator to enabler, and a socially responsible private sector, India can emerge as a model for inclusive, sustainable and sustained development.

Source: CII ARTHA – ISSUE 8