The report states that India’s export ambitions are being affected not only by global competition but also by domestic barriers that make it difficult for entrepreneurs to establish, formalise and expand their businesses. It compares India’s business environment with competing manufacturing destinations, including China, Vietnam, Bangladesh and Indonesia, and highlights significant differences in entry costs and regulatory procedures.
According to data cited in the report, the cost of starting a business in India, calculated as a percentage of income per capita, remains considerably higher than in several competing economies. Countries such as Vietnam and China have gradually reduced entry barriers for entrepreneurs, while India’s compliance requirements continue to create additional financial and procedural challenges for small manufacturers seeking to scale operations.
The challenge extends beyond registration expenses. Manufacturers in India must manage multiple registrations, licences, tax obligations, environmental approvals, labour compliances and factory-related regulations. These procedures often involve different government agencies, extensive documentation and delays. While such requirements may represent routine operational expenses for large companies, they can become major growth barriers for small enterprises with limited resources.
Rahul Ahluwalia, Founder-Director of the Foundation for Economic Development, said global enterprise surveys also reflect the difficulties faced by Indian businesses.
“The World Bank Enterprise Survey, which speaks to firms, shows that in India businesses spend substantially more time dealing with licences, permits and other regulatory compliances than in other competing nations. For example, 14 percent of businesses in India cite permits as a constraint compared to 1.8 percent in Vietnam and 1.4 percent in China. Until we make the Indian ecosystem as smooth for businesses as it is in competing countries, MSMEs in particular will struggle, because they lack the resources to navigate the regulatory maze,” he said.
The NITI Aayog report also highlights that entrepreneurs are required to secure multiple no-objection certificates, permissions and approvals before beginning operations. It further notes that compliance failures can expose business owners to personal liability, increasing the risks associated with entrepreneurship.
However, experts caution against directly replicating business models followed by countries such as China and Vietnam. VP Singh, Professor of Economics at Great Lakes Institute of Management, Gurgaon, said comparisons must consider India’s democratic structure.
“While there is no denying that labour laws, property rights and bureaucratic processes in India need reforms, India’s growth story, investment climate and regulatory frameworks cannot be compared with countries like Vietnam and China. India is a flourishing democracy while the other two have strong autocratic governance,” he said.
Singh pointed to developments such as the rollback of the Land Acquisition Ordinance and the repeal of the three farm laws as examples of how public consultation influences policymaking in India. He also highlighted initiatives such as the National Single Window System (NSWS), a digital platform aimed at simplifying approvals and clearances for investors.
According to Singh, India’s regulatory framework reflects a balance between protecting citizens’ rights and encouraging industrial expansion. He said this approach may sometimes make India’s investment environment appear slower compared with authoritarian economies, but it remains a key feature of the country’s democratic institutions.
The report emphasises that reducing regulatory hurdles is not only about improving India’s Ease of Doing Business rankings but also about strengthening the global competitiveness of Indian products. For MSMEs, which generally operate with limited capital and manpower, every additional licence, delay or compliance requirement increases costs before production begins. These additional expenses eventually affect pricing, competitiveness and the ability to enter export markets.
India currently has around 6.4 crore MSMEs, but only a small proportion participate in exports, despite the sector contributing nearly 45 percent of the country’s exports. The report argues that increasing the number of exporters requires making business creation easier rather than depending only on financial support measures.
The report proposes a broader roadmap to strengthen MSME exports. It recommends creating a single artificial intelligence-enabled information portal where exporters can access details related to tariffs, documentation, incentives, finance and international markets. It also suggests expanding e-commerce exports by simplifying regulations for small sellers, improving access to export finance, increasing adoption of Export Credit Guarantee Corporation (ECGC) schemes and developing a unified export credit marketplace to reduce financing costs.
The report further recommends integrating government databases to accurately measure MSME exports and design more effective policies while continuing efforts to reduce procedural challenges linked to merchandise exports.
The central message of the NITI Aayog report is that India’s export growth does not depend only on creating more incentives for businesses. It requires building an ecosystem where entrepreneurship becomes cheaper, simpler and faster. Unless starting and running a business becomes easier compared with competing economies, many MSMEs may struggle to reach the stage where global exports become a realistic opportunity.
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