From Compounding of Policy to Exponentials of Growth

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Before 1991, political leadership stifled India's aspirations by shunning entrepreneurs and keeping the economy at near autarchic levels.

Post-1991, political leadership catalyses the aspirations of India by increasing opportunities and embracing globalisation.

And 34 years later, India is a different country.

In 2025, at US$4.187 trillion, India has become the world’s fourth-largest economy, crossing Japan by US$1 billion. It remains the world’s fastest-growing and the only trillion-dollar economy with a growth rate of more than 6 percent. Indonesia’s growth stands at 4.7 percent, China’s at 4 percent, Saudi Arabia’s at 3 percent, Brazil's at 2 percent, and the United States' at 1.8 percent. India should cross Germany’s US$4.5 trillion low-growth economy to become the world’s third-largest in 18 months.

This rise is spectacular, both on an absolute footing and in relative terms. In 1991, India’s per capita income on a PPP basis of US$1,239 comprised 21 percent of the global average per capita income of US$5,764; in 2023 (the latest available data), it stands at 44 percent (India: US$10,166; world: US$22,850). India has eliminated extreme poverty—in 1975, more than 60 percent of Indians lived on less than US$1.9 a day; today, it is at 0.8 percent. It has 187 dollar billionaires today, from one in 1991. And yet, wealth disparity has not increased: the Gini coefficient has remained steady—it was 31.6 in 1993, rose to 34 percent in 2004, and stands at 32.8 percent in 2021. In other words, every constituency of India has benefited from the 1991 economic reforms ushered in by Prime Minister Narasimha Rao.

The success of these reforms, initiated under macroeconomic constraints, brought a new dynamism to the economy. Since then, subsequent prime ministers have turned economic reforms into bridges between the people’s aspirations and the political economy. From 2014 onwards, Prime Minister Narendra Modi has embraced reforms with a never-seen-before conviction. He inherited a US$2 trillion economy and has steered it to US$4 trillion in a decade, keeping inflation under control.

Every reform一from the Statement on Industrial Policy 1991 (under Prime Minister Narasimha Rao) as the mega-usherer of reforms and Mahatma Gandhi National Rural Employment Guarantee Act (under Prime Minister Manmohan Singh) as a social security scheme, to the Golden Quadrilateral Project (Atal Bihari Vajpayee) as a connectivity multiplier and the Goods and Services Tax (Narendra Modi) as an efficiency driver of indirect taxes一has taken India forward.

Today, standing amid the ruins of the rules-based international order, worsened by an atmosphere of wars in Ukraine, Israel, and India, Modi needs to, and continues to, compound his economic policymaking.

The Jan Dhan Yojana has brought financial inclusion to the poor by turning mobile phones into banking tools. The Goods and Services Tax has simplified indirect taxes. The Insolvency and Bankruptcy Code has ensured quicker resolution of distressed assets. The direct benefits transfer has become an efficiency enhancer. India’s highways have delivered a substantial increase in manufacturing activity. New opportunities for reforms to facilitate manufacturing, financial technologies, and semiconductors are continuing.

Each additional reform that Modi has brought in has seen a compounding of economic policy decisions—energy, telecommunications and retail; railways, roads and ports; and now financial technologies, payment systems and semiconductors. In the 21st century, across political leaderships, India has become a model of delivering economic reforms in a highly contested democracy.

Today, standing amid the ruins of the rules-based international order, worsened by an atmosphere of wars in Ukraine, Israel, and India, Modi needs to, and continues to, compound his economic policymaking. While the macroeconomic headwinds of 1991 have been replaced by geopolitical headwinds in 2025, India has negotiated well. The recent defeat of Pakistan, for instance, has also delivered a strategic victory and economic opportunity for India—Operation Sindoor has showcased the success of its “Made in India” defence capability.

Reforms have worked over the past 34 years; they will work for the next 22 years as India races towards Viksit Bharat in 2047 to become a US$30 trillion economy. India became a trillion-dollar economy in 2006. It took eight years to reach US$2 trillion, seven to touch US$3 trillion and four to cross US$4 trillion and become the world’s fourth-largest economy. It will take lesser time to cross US$5 trillion. Each trillion-dollar increase raises India’s per capita income by US$700. Multiply that by households of three or five, and then do the subsequent math around consumption to know what it means for people and jobs, companies and markets, taxes and welfare.

Further, another policy that was authored in 2016 ensures that growth happens with low inflation. The Reserve Bank of India's monetary policy framework ensures the Central Bank retains the inflation rate around 4 percent with an upper limit of 6 percent. As a result, India’s economic growth over the past nine years has come with an average inflation rate of 5.0 percent, compared to 7.9 percent in the decade to 2014.

Unlike the youth of 1991, present-day youth have many opportunities. Technology has democratised entrepreneurship, social media has democratised opinions, and transport and logistics have democratised regional access. But there is one last big reform left, and one that can turn compounding of policy reforms into exponentials of growth.

Compliance reforms for exponential growth

Prime Minister Modi is pushing India’s economic reforms ahead. He is also pushing for private sector-led growth, while turning public sector enterprises efficient. But underneath them all, one reform around easing business compliances and deregulation will change the entrepreneurial landscape of India, power economic growth even further and deliver exponential outcomes of dynamism on the path to a US$10 trillion economy by 2032. It will take all the reforms done so far and utilise them into an efficient production-logistics-exports-consumption matrix.

A February 2022 monograph titled Jailed for Doing Business enumerated the compliance hurdles entrepreneurs face while doing business. Briefly, there are 1,536 laws containing 69,233 compliances that regulate doing business in India (See table). These demand 6,618 annual regulatory filings. Modi took note of this research, formed a committee under NITI Aayog and enacted the Jan Vishwas (Amendment of Provisions) Act, 2023 on 11 August 2023. Jan Vishwas Part II is underway.

SOURCE: TeamLease as on 22 February 2022

Jan Vishwas 1.0 approached regulatory reforms with innovation, discernment, and persistence. Its innovation lay in using a single law to amend multiple legislations. Its discernment was evident in retaining some jail provisions—those that deter or penalise genuinely harmful behaviour—while eliminating a few that unfairly criminalised minor or administrative lapses. Its persistence showed in the painstaking task of identifying and eliminating 113 such provisions by engaging various central ministries to review and voluntarily relinquish unnecessary criminal penalties.

This approach, grounded in inclusivity and consultation, unfortunately reinforced the status quo with minor changes. Few institutions are inclined to dismantle the rules they have created and rely on, and as a result, only about 4 percent of the 678 Union Acts relevant to employers were amended. Of the 5,239 jail provisions in Union legislations, just 2 percent were repealed under Jan Vishwas 1.0.

Recognising the need for deeper reform, the government has signalled the arrival of Jan Vishwas 2.0 where merely another 100 provisions are likely to be decriminalised. This is not in tune with Modi’s ambition for Viksit Bharat. This next phase requires a shift from thinking incrementally to a big bang. This needs a three-pronged action.

First, it needs to be led by someone outside the system that has created the legal infrastructure to control rather than catalyse entrepreneurs. The bureaucracy, as it does with the Executive, needs to play a support function, not lead this crucial reform.

Second, a principles-based yet objective approach to reforms needs to be put together. The two—principles-based approach and objectivity—may seem contradictory, they may even collide. But policymaking is neither pure science nor pure art. The former will provide the art, the latter science. For instance, an Act that poisons the environment or harms workers is clearly out of the ambit of decriminalisation. But process delays are surely the mandate of decriminalisation. Another approach could be to decriminalise all provisions and rethink and rework those that need to carry imprisonment clauses. This would force a rethink on doing business. It would also mean going act by act, rule by rule, provision by provision. It would require an inter-ministry big picture framework that can visualise unintended consequences and plug loopholes. It is nobody’s case to decriminalise all compliances; it is in everybody’s interest to rationalise them, including getting rid of outdated and irrelevant compliances.

Once doing business is made easier, the reforms that began in 1991 and continue through 2025 will directly impact small and medium enterprises on the one side and mega corporations on the other.

And third, once the draft is out, it needs a platform of several conversations between all stakeholders—the executive, the bureaucracy, businesspersons and academics—across areas of economic activity such as industrial hubs or cities. The framework for such conversations must be designed only after the first two are in place.

Once doing business is made easier, the reforms that began in 1991 and continue through 2025 will directly impact small and medium enterprises on the one side and mega corporations on the other. The result will be an exponential growth, as two big risks—bad laws and the resultant corruption and rent seeking—are reduce,d and India’s compliance infrastructure becomes a catalyst for, rather than a hurdle before, a US$30 trillion economy in 2047.

Gautam Chikermane is Vice President at the Observer Research Foundation.

Rishi Agrawal is co-founder and CEO at Avantis RegTech.

• Indian Economy
• Economics and Finance
• Economic Reforms
• Developing and Emerging Economies
• India
• economic growth in india
• economic landscape in india
• fourth largest economy
• india economic outlook
• india gdp 2025
• india gdp growth
• indian economy overview
• india’s per capita income

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