Ease of Doing Business 2.0: Key Regulatory Reforms Expected for
Startups & MSMEs
From deeper decriminalisation and the new labour codes to compliance cuts and the World Bank's 2026 B-READY review — India's next wave of reform targets founders and small firms.
By Naina, 23rd June 2026
Ease of Doing Business 2.0 is moving from slogan to substance, as India lines up a fresh wave of regulatory reforms aimed squarely at startups and micro, small and medium enterprises. After a decade of digitising approvals and trimming red tape, the government is now pushing deeper changes, from expanded decriminalisation of minor offences to a long-awaited rollout of the labour codes, ahead of the World Bank's 2026 Business-Ready assessment. For founders and small-business owners, the next phase promises fewer filings, lower compliance costs, and faster approvals, though much of it is still taking shape.
The stakes are high. MSMEs and startups now anchor a large share of India's jobs and output, and global investors increasingly judge the country on how easy it is to start, run, and exit a business. The reform agenda spans the full business lifecycle, entry, licensing, labour, credit, taxation, and insolvency, and is being coordinated across the centre and the states. What follows is a guide to the key changes expected and already in motion.
The Shift to Ease of Doing Business 2.0
The first phase of reform built the plumbing: online incorporation through SPICe+, paperless MSME registration on Udyam, a National Single Window System linking dozens of ministries and states, and a sharp drop in compliance burden. Officials say more than 47,000 compliances have been reduced, simplified, digitised, or removed, alongside thousands of state-level reforms. The 2.0 phase is less about new portals and more about cutting the substance of regulation itself, fewer criminal penalties, lighter filings, and predictable rules that hold across states.
The Decriminalisation Push
The clearest pillar of the next wave is decriminalisation. The Jan Vishwas Act of 2023 removed criminal liability from 183 provisions across 42 laws, replacing jail clauses with monetary penalties for technical and procedural lapses. A second, larger round has followed, proposing to amend hundreds more provisions and decriminalise close to 288 across 16 central acts. For entrepreneurs, the change matters because it lowers the fear of prosecution for minor paperwork errors and shifts the system toward proportionate, civil penalties.
The Labour Codes Rollout
A major expected change is the full rollout of the four labour codes, which consolidate 29 central labour laws. For smaller firms, the codes promise lighter compliance: a single electronic registration, a single return, and an all-India licence valid for five years with deemed approvals. They cut the timeline for factory construction permission from 90 days to 30, exempt contractors employing fewer than 50 workers from licensing, and replace several criminal penalties with civil ones. Implementation across states is the piece founders are watching most closely.
The Compliance and Cost Cuts
Reducing the day-to-day cost of compliance sits at the centre of the agenda. The Business Reforms Action Plan, now in its eighth edition, and a new district-level plan are pushing states to simplify inspections, construction permits, and approvals. The Union Budget for 2026-27 leans further into this, with a stated focus on tax certainty, lower litigation, trust-based customs, and a more investment-friendly tax regime. The thrust is to make rules predictable so small firms spend less time and money simply staying compliant.
The Support Aimed at MSMEs
Several measures target small firms directly. The 2026-27 budget introduced the idea of trained para-professionals, deployed in Tier-II and Tier-III cities, to help MSMEs meet statutory requirements at affordable cost, with professional bodies designing short courses. Credit support continues to expand through long-running guarantee and collateral-free lending schemes, while invoice-discounting platforms aim to ease the working-capital squeeze caused by delayed payments. Together, these address two perennial MSME pain points: compliance capacity and cash flow.
The Startup Reform Track
Startups sit alongside MSMEs in the reform push. The Startup India framework, which has helped recognised startups grow from a few hundred in 2016 to more than 2.23 lakh by 2026, continues to offer seed funding, a fund-of-funds structure, and credit guarantees. The expected reforms focus on easier capital access, smoother scaling, and reduced friction in compliance, with fresh equity-funding vehicles and liquidity platforms aimed at growth-stage firms. Nearly half of recognised startups now have at least one woman founder or director.
The Global Scorecard
Much of the urgency is external. The World Bank retired its old Doing Business rankings, where India had climbed to 63rd by 2019, and replaced them with the Business-Ready, or B-READY, framework that scores more than 180 economies across the full business lifecycle. India is due to be assessed in the 2026 edition, and the reform drive is partly timed to show measurable progress. Strong foreign-investment inflows over the past decade have raised the bar for what global investors expect on regulation and predictability.
The Gaps and the Risks
The agenda is ambitious, but execution is the hard part. Labour codes have been notified yet await consistent rollout across states, and reforms that look clean on paper can stall in local implementation. Decriminalisation bills must clear parliamentary scrutiny before taking effect. Small firms also worry that frequent rule changes, however well-intentioned, create their own compliance churn. The test of Ease of Doing Business 2.0 will be whether the reforms reach a workshop in a small town as fully as they reach a boardroom in a metro.
The Direction of Travel
India's reform story is moving from building digital rails to rewriting the rules that run on them. For startups and MSMEs, the expected wave, deeper decriminalisation, simpler labour compliance, lower costs, and steadier rules, could meaningfully change the cost of doing business if it lands as designed. The coming year, shaped by the budget measures and the global B-READY review, will show how much of Ease of Doing Business 2.0 turns from intent into everyday reality for India's smallest firms.
Frequently Asked Questions
What is Ease of Doing Business 2.0?
It refers to India's next wave of regulatory reform, moving beyond digitising approvals toward cutting the substance of regulation, through deeper decriminalisation, simpler labour rules, lower compliance costs, and more predictable, trust-based governance for businesses.
How do the reforms help startups and MSMEs?
They aim to reduce the fear of criminal penalties for minor lapses, simplify registration and labour compliance, lower the cost of staying compliant, and improve access to credit and working capital, freeing founders to focus on building rather than filing.
What is the Jan Vishwas Act?
It is a law that decriminalises minor business offences by replacing imprisonment with monetary penalties. The 2023 version covered 183 provisions across 42 acts, and a larger follow-up extends this to hundreds more provisions.
What are the four labour codes?
They consolidate 29 central labour laws into four codes, offering simpler registration, a single return, all-India licences, faster approvals, and civil rather than criminal penalties, with lighter requirements for smaller firms.
What is the World Bank B-READY assessment?
Business-Ready, or B-READY, is the World Bank's framework that replaced the discontinued Doing Business rankings. It scores more than 180 economies across the full business lifecycle, and India is due to be assessed in its 2026 edition.