West Bengal must improve regulatory reforms to attract investment, says NITI Aayog vice-chairman

NITI Aayog Vice-Chairman Ashok Lahiri on Friday called for sweeping regulatory reforms in West Bengal, expressing concern over the state's performance and urging the government to improve the ease of doing business to attract fresh investments and accelerate economic growth.

Speaking at an event organised by the Bengal Chamber of Commerce and Industry in Kolkata, Lahiri said West Bengal was not among the leading states in implementing regulatory reforms and needed to step up its efforts.

"I think West Bengal does not do too well in terms of the regulatory reform agenda. It's not one of the top achievers. We must do better," he said.

He urged the state to identify and suggest measures that could improve its business environment, encourage investment and contribute to India's ambition of becoming a developed nation by 2047 under the 'Viksit Bharat 2047' vision.

Overlapping regulations and compliance burden need to be addressed

Lahiri said India's federal structure involved shared and overlapping regulatory responsibilities between the Centre and state governments, as well as municipal bodies and panchayats in several areas. Consequently, reforms would not deliver their intended results without effective implementation at the state and local levels.

He identified land use, building approvals, labour administration and fire safety as areas where businesses often have to deal with multiple state and local authorities, leading to overlapping requirements and procedural delays.

Regulatory obligations are also spread across several government departments, each maintaining separate forms, databases and inspection procedures. This places a disproportionate compliance burden on smaller businesses, he said.

Calling for a central coordinating mechanism, Lahiri said the necessity of individual regulatory requirements should be reviewed to identify and eliminate duplication. Routine permissions for low-risk activities could be replaced with self-certification or third-party verification.

He also called for reducing repetitive filings and unnecessary paperwork, arguing that businesses should not repeatedly be asked to submit information already available with government departments.

Excessive regulations hurting entrepreneurship and MSMEs

Expanding his argument beyond West Bengal, Lahiri called for a comprehensive overhaul of India's regulatory framework, warning that excessive compliance requirements, procedural delays and the possibility of imprisonment for minor violations were discouraging entrepreneurship, restricting the growth of micro, small and medium enterprises (MSMEs) and increasing the cost of doing business.

"Regulatory reform is not merely an administrative exercise. It is an economic growth strategy," he said.

He pointed out that excessive regulation imposed direct financial and administrative costs while also creating opportunities for rent-seeking. Regulatory barriers, he added, could sometimes be used by larger, established companies to restrict competition from smaller enterprises.

Lahiri also emphasised the need to establish greater trust between the administration and industry. Advocating a 'trust and verify' approach, he said businesses should not be trusted unconditionally and must remain subject to appropriate scrutiny.

Easier business closures needed to unlock resources

Lahiri argued that regulatory reforms should facilitate not only easier entry and expansion of businesses but also their orderly closure when they become unviable.

Drawing attention to the large number of shut factories in and around Kolkata, he said the inability to close unviable businesses in a timely and organised manner was resulting in considerable economic waste.

"Land is being wasted, capital is stuck up," he said.

He explained that expeditious closure of such units would release land, machinery, labour and financial resources for more productive economic activities.

Monetary penalties over imprisonment for minor violations

The NITI Aayog vice-chairman also advocated a calibrated approach to penalties, arguing that minor procedural and technical violations should attract monetary fines rather than imprisonment.

However, he stressed that serious offences involving fraud, corruption, adulteration and harm to the public must continue to attract criminal liability.

Referring to the Jan Vishwas amendments of 2023 and 2026, Lahiri said the government had already taken steps to decriminalise minor technical and procedural defaults. Several provisions prescribing imprisonment had been replaced with civil penalties and graded monetary fines.

GST and IBC among India's major reform achievements

Highlighting India's economic reform journey, Lahiri described the Goods and Services Tax (GST) as a major achievement in integrating the domestic market and simplifying the taxation system.

GST collections have increased from ₹8.8 lakh crore during the initial nine months of its implementation in 2017-18 to ₹22.27 lakh crore in 2025-26, he said.

He also highlighted the contribution of the Insolvency and Bankruptcy Code (IBC) in releasing capital that would otherwise remain locked up in financially distressed businesses.

Questions West Bengal's defence manufacturing potential

Turning to the state's industrial opportunities, Lahiri questioned why West Bengal had failed to attract more defence manufacturing units despite having established ordnance facilities at Dum Dum and Cossipore.

"Why more defence industries are not coming up in West Bengal? I hope the industry minister will look into the matter," he said.

In a subsequent interaction with the media on Saturday, Lahiri expressed optimism about improvements in West Bengal's regulatory environment, saying state governments were increasingly recognising shortcomings in their regulatory systems and working towards reforms.

He described regulatory reform as a continuous process and said it was too early to assess the performance of the West Bengal government based on its first five months in office. However, he expressed hope that the government would deliver on public expectations.

Lahiri also said West Bengal had considerable industrial potential but had lost ground over the years, and called for efforts to restore its position among India's leading industrial states.