Government Policies and Business Regulatory Environment

Government Response to the Pandemic

Due to the COVID-19 pandemic, from early 2020, manufacturing suffered greatly on both the supply and demand side. The Indian government imposed one of the longest lockdowns mandated by any country so far. The enormity of the lockdown has affected manufacturing activities and took a toll on the supply chains as well as the overall economy.

Knowing the economic risks associated with such a nationwide lockdown, the Government of India has provided an impetus to local businesses and domestic manufacturing by introducing a stimulus package of 10% of India's GDP (INR 20 trillion). The stimulus package provides loans to potential businesses, protection against the pandemic, and technology upgradation via employment. The package focused on land reforms, labor reforms, MSMEs, and industry incentives.

The government also distinctly identified key sectors, which are the pillars of the Indian economy, such as the electronics sector, and in April 2020, announced a package of INR 500 billion worth of incentives based on production and employment.

The government had also provided a few relaxations from the initiation of insolvency proceedings against organizations facing economic crises during the pandemic.

The RBI introduced liquidity measures listed below to help counter the pandemic slowdown. These measures are mentioned below:

  • The amount of minimum default was raised from INR 100,000 to INR 10 million11, thereby saving small and medium enterprises from insolvency by economic distress.
  • The government also provided temporary suspension of the initiation of corporate insolvency resolution processes for a period of six months, or such further period not exceeding one year from 25 March 202012.
  • Relaxations were also provided to the liquidator to exclude the entire time period of lockdown during COVID-19 from the computation of time-lines provided under the liquidation process13.

The government also emphasized the need of speeding up these insolvency processes once the lockdown was removed.

These announcements injected nearly 3.2% of the GDP in terms of liquidity into the Indian economy.

With the new measures, India's manufacturing infrastructure is poised for phenomenal growth with smart cities and industrial corridors being developed. Youth-focused programs and novel institutions are being dedicated to developing specialized skills. Innovation is being encouraged through better management of patent and trademark registration. A striking indicator of progress is the opening up of key sectors, including railways, defense, insurance, and medical devices, to dramatically increase the amount of FDI. These factors will result in stronger growth for the Indian economy and its populace and will lead to a rise in the investments in the country.

Production Linked Incentives (PLI)

In September 2021, under the Atmanirbhar Bharat initiative, to build a vigorous domestic manufacturing ecosystem, the government rolled out Production Linked Incentives for 13 key sectors (including telecom, pharmaceutical, automobile, etc.) with a total outlay of USD 26.3 billion. These incentives will be over and above the various state-level incentives currently available.


A robust vaccination program has seen over 1.86 billion doses given to Indians, with nearly 80% of the workforce population fully inoculated. Currently, the government is in the process of rolling out booster shots for double vaccinated citizens. Vaccines for the population under 18 are also being rolled out presently.

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Virender Bhasin
Executive Director
Entity Set-up & Management

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