Context: The Cabinet Secretary announced a new phase of administrative reforms to improve governance and prepare India for emerging global economic challenges.
- Central argument: The article questions the effectiveness of previous reform initiatives, arguing that changing administrative rules without reforming the underlying governance philosophy and institutional structures cannot deliver meaningful results.
- Core concern: Excessive centralisation, regulatory discretion, bureaucratic control and lack of trust in citizens and businesses are major obstacles to administrative and economic reforms.
India's Reform Performance: Emerging Concerns
- Weak firm dynamism: The Economic Survey 2025–26 highlights subdued business dynamism, with firm entry and exit rates below 1%, compared with 8–13% in comparator economies.
- Zombie firms: Approximately 15% of firms in the Economic Survey's sample were classified as zombie firms, indicating businesses with persistently weak financial and productive performance.
- Low productivity: Regulatory arbitrage, protected profit margins and firm-specific concessions often discourage competition, productivity enhancement and long-term investment.
- Regulatory burden: The IMF's 2025 Article IV Consultation Report notes that firms in India face longer customs delays than peer economies and senior management spends more time on regulatory compliance.
- Weak institutional environment: Despite changes in formal business regulations, businesses continue to face administrative friction, discretionary enforcement and uncertainty.
Political Economy of Regulatory Reforms
- Rent-seeking: The Economic Survey identifies regulatory arbitrage, protected margins and firm-specific accommodations as factors that allow businesses to earn profits through regulatory advantages rather than productivity and innovation.
- Uneven enforcement: The Chief Economic Advisor describes India's corporate sector as operating in a hybrid environment where economic rents are available, enforcement is uneven and political mediation substitutes for market discipline.
- Concentration of influence: The article argues that preferential treatment of certain business groups and discretionary allocation of economic advantages undermine fair competition.
- Institutional problem: Simply changing the distribution or structure of economic rents does not eliminate rent-seeking; it may create additional opportunities for rent extraction at different levels of administration.
- Impact on reforms: Such political-economic incentives weaken administrative reforms because the underlying structures encouraging discretion and preferential treatment remain unchanged.
Limitations of Previous Reform Initiatives
- Ease of Doing Business: The earlier initiative focused excessively on improving formal rankings and simplifying procedures without adequately addressing the actual difficulties faced by businesses.
- Formal versus substantive reforms: Changes in administrative rules do not necessarily improve the institutional environment in which citizens and businesses operate.
- Tax reforms: Consolidation of parts of the taxation system has been an important formal reform, but businesses continue to face uncertainty in tax enforcement.
- Labour and corporate reforms: Labour regulations and company incorporation procedures have been simplified, but implementation-related complexities persist.
- Environmental regulation: The article criticises the weakening of environmental safeguards in the name of regulatory simplification.
- Decriminalisation: Several minor offences have been decriminalised, but new layers of compliance requirements and regulations have offset some of these improvements.
- Regulatory complexity: Unclear Quality Control Orders (QCOs), retrospective taxation, uncertain enforcement and numerous minor regulations continue to increase compliance costs.
Excessive Centralisation of Governance
- Concentration of authority: The article argues that India has developed an excessively centralised administrative, fiscal and political structure.
- Weak decentralisation: Genuine reforms based on the 73rd and 74th Constitutional Amendments, which empower rural and urban local governments, have not received adequate attention.
- State-level autonomy: Several State governments have increasingly become dependent on the Centre, weakening the spirit of cooperative federalism.
- PMO-centric administration: Greater dependence of the Cabinet structure on the Prime Minister's Office (PMO) has contributed to concentration of decision-making.
- Administrative control: Excessive central oversight limits institutional autonomy and reduces the ability of lower levels of government to respond to local needs.
- Selective success: The government has demonstrated the capacity to deliver in mission-mode initiatives such as highways and certain industrial policy interventions, but these successes have not translated into broad-based institutional reform.
Administrative and Governance Challenges
- Bureaucratic orientation: The Cabinet Secretary reportedly identified 11 types of bureaucrats whose differing administrative orientations could affect institutional performance.
- Human resource concerns: The article highlights that administrative reform also requires changes in bureaucratic incentives, attitudes and organisational culture.
- Surveillance and discretion: Increasing collection of information about citizens and businesses can expand discretionary government intervention rather than necessarily improving public service delivery.
- Logical discrepancy-based governance: The use of algorithm-driven logical discrepancy checks in administrative processes reflects a wider tendency to treat citizens as potential sources of irregularity rather than trusting them.
- Control-oriented governance: Excessive monitoring and procedural control can discourage innovation, entrepreneurship and citizen autonomy.
Three Fundamental Principles for Administrative Reform
The article argues that meaningful administrative reform requires a fundamental change in the philosophy of governance.
- Presumptive trust in citizens: Citizens and businesses should be treated as autonomous and responsible entities. Regulation should target genuine violations rather than impose excessive surveillance and compliance requirements on everyone.
- Decentralisation: Decision-making powers and resources should be transferred to appropriate levels of government, strengthening local institutions and democratic accountability.
- Minimum unnecessary control: Reduce bureaucratic discretion, intrusive monitoring and unnecessary administrative intervention while ensuring transparency and accountability.
Way Forward
- Reform institutional conditions: Move beyond changing formal rules and address the underlying institutional structures that determine how regulations are implemented.
- Strengthen decentralisation: Implement the spirit of the 73rd and 74th Constitutional Amendments through greater devolution of functions, finances and functionaries.
- Ensure regulatory certainty: Simplify compliance requirements, reduce retrospective taxation and establish predictable enforcement mechanisms.
- Promote fair competition: Curb rent-seeking, preferential treatment and political mediation in business operations.
- Reform bureaucracy: Improve accountability, professional capacity, performance incentives and citizen-centric administrative behaviour.
- Build trust-based governance: Replace excessive control with risk-based regulation, transparent procedures and greater institutional autonomy.
- Strengthen environmental governance: Ensure that ease of doing business does not come at the cost of environmental sustainability and regulatory accountability.
Conclusion: Administrative reforms cannot succeed merely through new rules, digital systems or top-down restructuring. They require a fundamental transformation in the state's relationship with citizens and businesses. Trust, decentralisation and accountable governance must become the foundations of Administrative Reforms 3.0; otherwise, reforms risk becoming another exercise in bureaucratic control rather than institutional transformation.
