The third leg of India’s three-year-long decriminalisation drive eases doing business and reduces corruption. The responsibility for economic growth now shifts to the states
The journey of reforming India’s complex and colonial web of compliances has been nudged by an idea, followed through with a pilot legislative framework, and is easing the doing of business by using a clean and enabling policy desalination process that will reduce regulatory frictions and create a win-win for entrepreneurs and governments alike.
The idea lies in a 10 February 2022 ORF Monograph titled Jailed for Doing Business. The pilot legislative framework is housed in an 11 August 2023 law, the Jan Vishwas (Amendment of Provisions) Act, 2023 (Jan Vishwas 1.0). The subsequent clean-up of legal dust, in the form of outdated compliances, was tabled in the Lok Sabha (lower house of Parliament) on 27 March 2026 through the Jan Vishwas (Amendment of Provisions) Bill, 2026 (Jan Vishwas 2.0).
The core focus of the Jan Vishwas laws, one enacted, one presented in Parliament, and one under construction, is to rationalise the decriminalisation of petty offences.
The core focus of the Jan Vishwas laws, one enacted, one presented in Parliament, and one under construction, is to rationalise the decriminalisation of petty offences. That is, they amend provisions carrying imprisonment clauses and convert them into financial penalties, thereby reducing the threat of jail for entrepreneurs for unconscious lapses such as missing a filing deadline, rather than for conscious criminal actions such as the adulteration of food and medicines.
Jan Vishwas 2.0 covers 79 Acts, of which 70 pertain to doing business. This is almost double the number in Jan Vishwas 1.0, which covered 42. It amends 784 sections, of which 717 impact entrepreneurs. This is four times the number amended under Jan Vishwas 1.0. Many of the amendments that Jan Vishwas 1.0 and 2.0 bring to India’s regulatory compliance architecture pertain to laws enacted in the colonial era. One-tenth of the laws amended, or eight out of 79, belong to this period, for instance, the Drugs and Cosmetics Act, 1940.
| Breakdown of Jan Vishwas 2.0 | |
| Acts Covered | 79 |
| Acts legislated during the Colonial Era | 8 |
| Acts affecting Doing Business | 70 |
| Total No. of Sections Covered | 784 |
| Total No. of Sections Covered for Ease of Doing Business | 717 |
The mindlessness with which these laws have been enacted, or the legislative lethargy with which they have been maintained over decades, reflects a regulatory apparatus that had its genesis in the colonial era and was aimed at crushing the Indian economy, followed by anti-wealth, anti-entrepreneur, and anti-business approaches that kept India economically behind. Jan Vishwas 1.0 began the journey, Jan Vishwas 2.0 is advancing it, and Jan Vishwas 3.0 will consolidate the process.
In a line, Jan Vishwas 2.0 interrogates India’s regulatory framework and amends it on the go. Under Section 30 of the Apprentices Act, 1961, for instance, a failure to engage the prescribed number of apprentices could trigger prosecution. In parallel, Section 30(1)(e) treated the act of charging an apprentice even a nominal training-related fee as a criminal offence, carrying the risk of imprisonment. In effect, a small manufacturer facing fluctuating demand or making a minor administrative error could be exposed to criminal liability for what were, at their core, human resource or clerical lapses. Jan Vishwas 2.0 replaces this with graded civil penalties and structured “improvement notices”, signalling a clear shift from punishment to correction.
A similar disproportionality was visible in the Drugs and Cosmetics Act, 1940. Under Section 29, even using a government analyst’s report in advertising, for instance to highlight product quality, could invite criminal prosecution. A pharmaceutical company quoting a favourable government lab result could, until recently, face jail time. This has now been recalibrated, and such actions attract monetary penalties, with higher financial consequences for repeat violations under Section 30(2). The emphasis is now on deterrence through economic disincentives rather than automatic jail terms.
Even operational non-compliance in critical infrastructure was not spared. Under Section 146 of the Electricity Act, 2003, failure to comply with regulatory directions, often arising from technical or real-time operational constraints, meant imprisonment. The move away from custodial consequences reflects a more grounded understanding of sectoral complexity, holding operators accountable without criminalising execution risks.
What once took businesses to courtrooms under the threat of imprisonment is now being addressed through graded, proportionate, and administrative mechanisms. It is a shift away from viewing businesses as potential offenders to treating them as participants in a rules-based system where compliance is enforced but not criminalised by default.
Perhaps the most telling change is the introduction of trust-based enforcement. Under Section 14(1) of the Central Silk Board Act, 1948, even inadvertent misreporting could earlier trigger criminal action. The revised approach introduces a warning-first mechanism, reserving penalties for repeat defaults. It recognises the difference between intent and error, and between a deliberate violation and a clerical oversight.
Taken together, these examples illustrate the broader shift underway in Jan Vishwas 2.0. What once took businesses to courtrooms under the threat of imprisonment is now being addressed through graded, proportionate, and administrative mechanisms. It is a shift away from viewing businesses as potential offenders to treating them as participants in a rules-based system where compliance is enforced but not criminalised by default.
Jan Vishwas 1.0 was not designed as a silver bullet to move the needle on easing the doing of business in India. It was a powerful declaratory instrument of state policy. The Act redirected the government’s regulatory approach by decoupling minor procedural non-compliance from criminal liability. Philosophically, it changed the use of criminal penalties as a primary “lever of control,” opting instead to rationalise the use of penalties by aligning the severity of the sanction with the gravity of the offence.
This transition from punitive oversight to proportionate administration replaces the threat of incarceration with a civil-monetary framework, creating a climate of trust without compromising regulatory oversight. The Act functions as a statutory reset. While the numerical impact on compliance costs is measurable, its true value lies in the codification of legislative intent. It is a commitment to ending “regulatory overreach” and ensuring that criminal law is reserved for serious violations rather than administrative lapses. Once Jan Vishwas 2.0 is notified, it will become a force multiplier.
This has consequences. For decades, even minor technical lapses were treated as criminal offences, carrying the threat of imprisonment. These provisions were colonial by instinct, lazy in their legislative design, and marked by little application of mind. The Jan Vishwas 1.0 framework decisively moved away from that approach. By removing custodial sentences and recasting such violations as civil defaults, the law acknowledges a simple reality that not every lapse warrants criminal prosecution. The replacement of criminal fines with civil penalties is more than a semantic change; it signals a transition from deterrence through fear to enforcement through proportionality.
Equally important is the redistribution of decision-making authority. The burden of adjudication is being steadily shifted away from courts to designated administrative officers. This is a structural correction. Courts were never designed to handle the high volume of routine compliance breaches that define India’s regulatory landscape. By enabling administrative adjudication, supported by clear rule-making powers and updated definitions, the framework aims to deliver faster, more specialised, and context-aware decisions without compromising oversight. There is an inherent conflict of interest here that needs to be addressed. The laws enable the creation of such adjudication mechanisms. If found unsatisfactory, the next step would, of course, be the judicial process.
Another critical dimension is the rationalisation of monetary penalties. Historically, penalties have often been either outdated or inconsistently applied. The revised framework introduces clearer limits, updated amounts, and more structured discretion. This ensures that penalties remain relevant to current economic conditions while also reducing arbitrariness. For businesses, this brings a degree of predictability that has long been missing from the compliance ecosystem.
The one crucial and defining characteristic of Jan Vishwas 2.0 is the curtailment of executive discretion. In previous eras, the decision to label an act as “criminal” was often arbitrary or inherited from colonial-era logic.
At the same time, the framework retains sufficient enforcement “teeth.” While the underlying offences are decriminalised, non-compliance with civil penalties, particularly non-payment, can still trigger coercive measures, including imprisonment. This ensures that the system does not drift into laxity. Instead, it reinforces a more mature compliance philosophy, one that distinguishes between intent and oversight but remains firm on enforcement when obligations are ignored.
The one crucial and defining characteristic of Jan Vishwas 2.0 is the curtailment of executive discretion. In previous eras, the decision to label an act as “criminal” was often arbitrary or inherited from colonial-era logic. For Jan Vishwas 2.0, the Union government mandated that ministries apply an intensity-of-harm litmus test that turned regulatory drafting on its head. The principles of regulatory decriminalisation centre on evaluating the nature, impact, and necessity of a legal provision to determine whether criminal sanctions are truly warranted.
The process begins by identifying whether the violation involves a procedural action or inaction and whether it constitutes a general contravention. A critical threshold for maintaining criminal status is the severity of the impact, specifically whether the violation results in physical harm or creates externalities so vast that the violator cannot provide adequate compensation. Furthermore, the framework assesses the underlying intent behind the violation, looking for malafide intent to defraud stakeholders, alongside a quantitative review of the number of cases registered or pending under that specific provision.
The evaluation also requires a qualitative judgment by the relevant ministry or department regarding whether the current punishment is appropriate to its purpose and whether the offence is already punishable under other legislation, which would indicate redundancy. Finally, the principles encourage a shift toward administrative oversight by considering whether the offence could be better regulated through civil penalties, particularly for first-time instances, to balance compliance with proportionality.
The biggest change in the decriminalisation of the compliance architecture has come in the form of labour reforms. The four new labour codes — the Code of Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020 — which reengineered 29 Union labour laws, have significantly reduced imprisonment clauses and the compliance burden.
Under these codes, the 1,436 rules in the 29 labour laws have been reduced by 75 percent to 351 rules across the four labour codes. In terms of reporting, 181 forms have been cut by 60 percent to 73. Finally, the 84 registers for returns have been consolidated to eight, a reduction of 90 percent. These changes compound to make doing business easier. Imprisonment terms have been removed for first-time errors and retained only for repeat and serious safety violations. The paradigm has shifted to a facilitative approach, through the inspector-cum-facilitator model, from a punitive, inspector-driven system.
Step back, and we see three streams of action. First, Jan Vishwas 1.0 was a declaration of intent and a testing of the compliance waters. Jan Vishwas 2.0 is the institutionalisation of trust based on legislative conviction. Second, the government is finally dismantling an architecture of suspicion that for decades laid out booby traps of compliance for entrepreneurs. It is beginning to see entrepreneurs as drivers of tax revenue, growth, employment, and wealth. Third, it has begun to question the adversarial and rent-seeking relationship between the state and businesses.
These changes compound to make doing business easier. Imprisonment terms have been removed for first-time errors and retained only for repeat and serious safety violations. The paradigm has shifted to a facilitative approach, through the inspector-cum-facilitator model, from a punitive, inspector-driven system.
Read together, Jan Vishwas 1.0, the Labour Codes, and Jan Vishwas 2.0 reflect a reduced, though still existing, hostility towards entrepreneurs, the impact of which has been, and continues to be, the placing of hurdles before growth. It had created as many as 26,134 tributaries of corruption, using jail terms as a threat. In the changed scenario of serial threats, from war and geopolitics to artificial intelligence and energy disruptions, the government is adapting quickly to new realities. It is reducing the weaponisation of laws by the corrupt. Corruption, however, is a disease, a threat, and an economic epidemic that, tragically, no government has been able to solve. Yet.
The approach of decriminalisation could help change this. It reflects an embrace of a trust-based regulatory framework, supported by stakeholder consultations across industry and government. It also indicates a progression in regulatory philosophy from discretion-driven enforcement to data-backed decision-making.
The best time to reform is yesterday. The next best is now. If the Indian experience is to be recorded, however, there is nothing like a good crisis to deliver change — the balance of payments crisis in 1991, the COVID-19 crisis of 2019, and now, in the midst of military invasions (Russia’s war in Ukraine and the US-Israel war on Iran), military threats (to Greenland and Cuba by the US and to Taiwan by China), and a broader weaponisation of trade and tariffs by the US against allies, adversaries, and neutrals alike.
At such a time, easing compliances so that small and medium-sized Indian entrepreneurs can seize opportunities and confront threats is as much an economic drive as it is a strategic imperative. Already one of the most intense reformers, the Narendra Modi government has been consistently delivering difficult economic reforms with conviction — from the Goods and Services Tax and a constant work-in-progress insolvency and bankruptcy law to labour reforms and the clean-up of banks’ non-performing assets. The spirit of Jan Vishwas 2.0 reflects the same reformist drive, this time focused on compliance.
Looking ahead, the responsibility for further decriminalisation as well as economic growth now shifts to the states.
Gautam Chikermane is Vice President at the Observer Research Foundation.
Rishi Agrawal is Co-founder and CEO at Teamlease Regtech.
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Gautam Chikermane is Vice President at Observer Research Foundation, New Delhi. His areas of research are grand strategy, economics, and foreign policy. He speaks to ...
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