The year 2025 highlighted significant policy failures in India, with poor regulation identified as a primary cause across various sectors, including the startup ecosystem, civil aviation, finance, and public health. These regulatory shortcomings have impeded progress and affected millions. The challenges stem from inherent weaknesses in India’s statutory regulatory authorities (SRAs), including legacies of excessive central planning, insufficient rule of law, and low state capability. This has resulted in a deeply interventionist regulatory state lacking effective implementation mechanisms, leading to regulatory bottlenecks, increased business costs, reduced competitiveness, and stifled innovation and investment.
The Broad Stroke of Weak Regulation in 2025
India’s aspiration for rapid growth and development in 2025 encountered substantial friction due to deeply ingrained systemic issues within its regulatory framework. This period underscored that mere policy formulation without robust, independent, and transparent enforcement mechanisms leads to a cascade of negative consequences, from economic stagnation to public safety hazards. The pervasive nature of these regulatory bottlenecks and the resulting increased business costs painted a clear picture: a state designed for control rather than facilitation, stifling the very innovation and investment it sought to attract.
The legacy of excessive central planning, coupled with insufficient rule of law and low state capability, continued to haunt India’s statutory regulatory authorities (SRAs). This foundational weakness meant that while policies might have noble intentions, their implementation often faltered, leading to a disconnect between legislative ambition and ground reality. The consequences were palpable across multiple sectors, illustrating a pressing need for a fundamental shift in regulatory philosophy and execution.
Unpacking Sector-Specific Policy Failures in India 2025
Startup Ecosystem: A Shaky Foundation
Experienced a “reckoning” with a surge in startup shutdowns, particularly in FinTech, EdTech, and HealthTech. The FinTech sector saw a 75% failure rate among venture-backed startups, partly due to navigating complex legal and compliance requirements. Tighter regulations by the Reserve Bank of India (RBI) on digital lending and Know Your Customer (KYC) norms exacerbated failures.
Turbulence in Civil Aviation
A major disruption occurred in early December 2025 when IndiGo faced a network meltdown and thousands of flight cancellations, attributed to mismanagement of new Flight Duty Time Limitation (FTDL) norms. Earlier, a plane crash in Ahmedabad highlighted inadequate air safety oversight and structural flaws within the Directorate General of Civil Aviation (DGCA).
Eroding Financial Investor Confidence
Concerns were raised about regulatory failures and conflicts of interest within the Securities and Exchange Board of India (SEBI), potentially damaging investor confidence. Issues with non-banking financial companies (NBFCs) and governance failures in cooperative banks were linked to central planning and inadequate regulatory frameworks.
Influencer Economy: Uncharted Waters
Increased regulatory action in the influencer marketing economy. The Advertising Standards Council of India (ASCI) reported significant violations due to failures in disclosing paid partnerships. SEBI enforced stricter guidelines on financial influencers to protect investors.
“Make in India”: Unfulfilled Potential
Criticized for policy failures a decade after its launch. Lacked a strong policy backbone, suffered from underfunded infrastructure, and failed to prioritize key manufacturing sectors. Led to a decline in the manufacturing sector’s share of GDP and a drop in jobs. Small manufacturers disproportionately struggled.
Social Welfare Programs Under Attack
The proposed bill to replace the Mahatma Gandhi Rural Employment Guarantee Act (MGNREGA) faced criticism as an “attack” on social and economic justice. The existing MGNREGA has been systematically underfunded, leading to denied work and significant wage arrears.
Public Health: Critical Gaps
Renewed issues of cough syrup-related deaths in 2025 drew scrutiny to the Central Drugs Standard Control Organisation (CDSCO) and state drug regulators. This highlighted deep regulatory weaknesses in a critical sector affecting public health, with severe consequences for product safety and quality.
Environmental Policy in Peril
Major challenges due to institutional and policy failures, including a fragmented framework and inadequate enforcement. Despite an elaborate legal structure, ecological degradation persists due to flaws in implementation, accountability, and policy coherence. The urban climate crisis is a direct result of policy failures.
Decoding the Causes of Poor Regulation in India 2025
Reactive vs. Proactive
Regulatory bodies often react to problems rather than proactively preventing them.
Limited Independence
Function as extensions of government ministries, susceptible to political interference.
Coordination Gaps
Overlapping mandates and lack of coordination among bodies create inefficiencies.
Inadequate Expertise & Capacity
Agencies suffer from shortages of specialized expertise and understaffing.
Regulatory Capture
The regulatory process influenced by powerful politicians and bureaucrats.
Outdated Laws & Over-regulation
Laws are obsolete and fail to keep pace with technology, leading to poor implementation.
Lack of Transparency
Non-disclosure of information fosters corruption and nepotism.
Human Resource Constraints
Limitations in human resources underpin policy design and implementation gaps.
Resistance from Lobbies
Powerful lobbies, particularly in healthcare, have resisted effective regulation.
Towards a Better Future: India’s Regulatory Reforms in 2025
The Indian government initiated significant reforms to streamline regulations, enhance transparency, and improve the ease of doing business and living:
Jan Vishwas Act & Bill
Proposes to decriminalize 288 provisions and amend 67 others across 355 provisions.
Reducing Compliance Burden (RCB)
Over 47,000 compliances reduced by November 2025 through simplification and digitization.
National Single Window System (NSWS)
Facilitated single-window clearances, processing over 1.1 million applications by November 2025.
Centralized KYC & RIA
Plans for Centralized KYC India and a structured Regulatory Impact Assessment framework to boost investment.
Business Reform Action Plan (BRAP)
Eighth edition (BRAP 2026) rolled out in November 2025 to strengthen State Single Window Systems.
High-Level Committee for Reforms
Slated for 2025-26 to review non-financial sector regulations for a light-touch framework.
Investment Friendliness Index
Set to launch in 2025 to promote competitive cooperative federalism among states.
Financial Stability and Development Council (FSDC)
New mechanism to evaluate existing financial regulations for enhanced responsiveness.
New Labour Codes
All four national labor codes activated by November 2025, replacing 29 legacy laws.
Shanti Bill 2025
Passed in December 2025, opening nuclear power to private participation and establishing single oversight.
Insurance Bill 2025
Passed in December 2025, strengthening IRDAI’s role, reducing government micro-regulation, and making FDI rules more pragmatic to increase insurance penetration and promote public welfare.
The Path Forward for India’s Regulatory Landscape
The policy failures in India during 2025 underscore that poor regulation is a significant impediment to national progress. The comprehensive reforms initiated in 2025 demonstrate a commitment to addressing systemic issues by enhancing transparency, reducing business costs, and improving the ease of doing business. These steps are crucial for transforming India’s regulatory landscape, fostering sustainable economic growth, and ensuring greater public welfare. The journey ahead will require continued vigilance, adaptability, and a proactive stance to build a resilient and growth-oriented regulatory environment.
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