Business environment in India

The business environment in India comprises the legal, regulatory, fiscal, and institutional conditions under which firms are established, operated, financed, taxed, and wound up. It is shaped by both the Government of India and by the state governments, which administer much of the law governing land, labour, electricity, and local licencing. Consequently, states vary substantially. Assessing the business environment includes de jure assessment (according to statutory laws and formal regulations) and de facto measures that reflect on-the-ground implementation.

The World Bank's Doing Business report, in which India was ranked 63rd in the 2020 edition after improving by 79 places over five years, was discontinued in September 2021 following an investigation into data irregularities in the 2018 and 2020 editions. Its successor, Business Ready (B-READY), is being rolled out in stages, and the government has stated that India will be assessed in the 3rd edition, scheduled for release in 2026.

The central government has pursued procedural simplification, compliance reduction, and decriminalisation of regulatory offences. It has claimed it removed 47,000 compliance requirements and over 9,700 state and union territory-level reforms under the Business Reform Action Plan. Independent and official analyses, nonetheless, continue to identify the volume of regulations, use of criminal sanctions for routine regulatory infractions, slow contract enforcement, high tariffs, and technical barriers as constraints on firm growth. The Government's Economic Survey 2024-25 urged the state to "get out of the way" of businesses and made systematic deregulation its central recommendation.

Measurements and rankings

Doing Business report

From 2003 to 2019, the World Bank published annual Doing Business reports ranking economies on indicators such as starting a business, obtaining permits, paying taxes, and enforcing contracts. India's rank improved from the low 140s in 2014 to 63rd in the 2020 edition, an improvement the Narendra Modi-led government attributed to its reforms. In September 2021, the World Bank discontinued the report after an external investigation found data irregularities in 2018 and 2020 additions, including pressure on staff to alter countries' scores. The Bank has announced its successor, B-READY, which will assess countries on ten topics across the business lifecycle. India was not included in the first two editions; it will be covered in a report expected in late 2026. State-level assessment

The Department for Promotion of Industry and Internal Trade has run a Business Reform Action Plan since 2015, ranking states and union territories against a list of reform measures.

Related indicators The World Justice Project's Rule of Law Index ranked India 86th out of 143 countries. Transparency International ranked India 91st out of 182 countries in its annual Corruption Perceptions Index with a score of 39, an improvement of one point from the previous year.

Regulatory and compliance burden

A recurring theme in analyses of India's business environment is the number of distinct obligations a firm must satisfy across central, state, and municipal laws, and the cost of compliance. A 2022 study, Jailed for Doing Business, by TeamLease Services and the Observer Research Foundation identified 69,233 compliance requirements applying to Indian businesses across over 1536 laws—of which 37.8% carried criminal penalties for violations. The report also noted 3,577 regulatory changes in 2021, averaging ~10 changes per calendar day.

Criminalisation of regulatory offences

The Jailed for Doing Business report counted 26,134 compliances across 1,536 business laws for which non-compliance could result in criminal prosecution and imprisonment, with labour legislation containing the highest density of such provisions. In a separate report in 2025, the Vidhi Centre for Legal Policy, a New Delhi-based think-tank, noted over 7,300 distinct offences across federal laws in India. Scholars have also noted that criminal law is routinely exercised for civil matters. There has been some effort from the government to reform; it passed a Jan Vishwas Act in 2023 decriminalising dozens of offences, and a more comprehensive one in 2026. Piyush Goyal has stated that the government is working on a third bill to decriminalise minor business-related offences.

Trade and investment

India's net foreign direct investment has declined considerably in recent years; from the peak of $44 billion in 2020-21, it fell to less than $1 billion in 2024-25, and recovered slightly in 2025-26 to $7.6 billion. The gross inflows in 2025-26 were $94.6 billion.

India's most favored nation tariff rate is 17.6%, it has been consistently increasing since 2018; it was 13% in 2014-15 and had increased to 14.3% in 2020-21. In addition, India imposes significantly high technical barriers to trade via Quality Control Orders, and is considered the main user of anti-dumping measures. A 2024 study found that India has filed 17% of total global anti-dumping petitions at the World Trade Organization between 1995 and 2022, filing 1,130 out of 6,582 cases. India has imposed anti-dumping duty on over 300 products.

Labour

India has restrictive labour laws, which have been often blamed for hurting its growth, particularly in the manufacturing sector. ~90% of the Indian labour force is employed in the informal sector. The fragmented architecture of India's central labour laws was considerably simplified in late 2025 when the government subsumed 29 labour laws into four labour codes to maintain uniformity and bring clarity.

Land The Constitution of India empowers only the states to make laws on land under Schedule VII. As a result, states vary widely in land use, title, floor area ratios, and other land-related matters. Post-independence land reforms in India focused on redistribution: abolition of zamindars, regulating tenancy, and capping holdings (a ceiling on how much land can be owned by one person). Land titles in India remain uncertain, and about two-thirds of civil cases in district courts relate to land and property.

India has presumptive land ownership; the government registers the transfer of title, but does not guarantee ownership, unlike the Torrens title system. The onus is on the occupier to prove the title in case of a dispute. Land records are poorly maintained and often do not represent the on-ground position. Land data is available across different siloed departments and is cumbersome to access.

Taxation

India has simplified its tax laws with the introduction of the Goods and Service Tax in August 2016, which replaced a maze of state-level indirect taxes, duties, surcharges, and cesses into a national-level unified regime. In September 2025, four-tier GST regime was simplified with two main tax slabs of 5% and 18%, along with a 40% rate for luxury and sin goods. Simultaneously, the direct tax law in the country—Income-Tax Act, 1961—was replaced by the Income-Tax Act, 2025, which came into effect from 1 April 2026.

Retrospective taxation

The Constitution of India allows the government to levy retrospective taxes. In 2012, then Finance Minister Pranab Mukherjee, introduced a controversial amendment to the Income Tax Act, 1961, allowing the government to claim retrospective taxes on past transactions, even when they took place among foreign entities if assets were located in India. The amendment followed a Supreme Court of India ruling that gains from indirect transfers of Indian assets were not taxable in a matter involving Vodafone. The controversial amendment led to tax demands in 17 cases, four of which went to investment-treaty arbitration.

On 25 September 2020, a tribunal at the Permanent Court of Arbitration at The Hague found that India's treatment of Vodafone over a 20,000 crore tax demand breached "fair and equitable treatment." In December 2020, another tribunal of the court ruled the levy on Cairn Energy, among other things, amounted to "direct expropriation," and awarded $1,232.82 million to Cairn, against a demand of $5,584.39 million. In July 2021, a Parish court let Cairn freeze about 20 Indian government properties worth over €20 million ($24 million).

Retrospective tax policies discourage foreign investors. In 2015, former US Assistant Secretary of Commerce Raymond Vickery said the Vodafone case "sent a very negative signal to international markets." Economist Robert Higgs argues that policies that shake investors' confidence that property rights will last hold back long-term private investment. He called this "regime uncertainty".

Following the legal setbacks and international perception, the government withdrew demands on transactions made before 28 May 2012 and offered to refund tax already paid, albeit without interest. It also acknowledged that "retrospective amendments militate against the principle of tax certainty and damage India's reputation."

Assessment and debate The absence of current international benchmark, pending India's inclusion in B-READY, has left the debate to rest on domestic data and independent studies. Notably, India's reputation as a hard place to do business is accepted despite reforms claimed by the government.

Business environment in India

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