Contract enforcement, land title uncertainty, regulatory exit, the distance between policy announcement and on-ground implementation: acknowledged by every government, represented on by every industry body, resolved by no single ministry. Why do India's most thoroughly documented institutional barriers persist in 2026?
India attracts materially less FDI than what its market size and growth trajectory would predict. The shortfall is explained not by sectors that are closed, but by structural barriers that persist across sectors that are nominally open. These barriers have been identified in every major diagnostic for two decades. They are not unknown. They are unresolved. The question worth asking is not what the barriers are; every investor already knows. The question is why the system has not fixed what it knows is broken. Contract enforcement is the single most cited deterrent. The Commercial Courts Act 2015 was designed to create a fast-track mechanism. The institutional response from the judiciary was to treat Commercial Courts as an additional layer rather than a replacement. In many states, the same judges who handle regular civil cases also sit as Commercial Court judges. The infrastructure was not augmented.
The case allocation system was not redesigned. The Act created a label. It did not create a separate institutional machinery. The government's own internal assessments have flagged this. But judicial infrastructure sits outside the executive's direct control. The government can pass a law creating Commercial Courts. It cannot compel the judiciary to staff them, equip them, or prioritise commercial disputes over the existing backlog.
On land, the insider observation is not that titles are presumptive. It is what actually happens when a manufacturing company tries to acquire land through a state industrial development corporation. The "land bank" that appears on the India Industrial Land Bank portal shows parcels as available. The company expresses interest.
Then the ground-level reality emerges: encumbrances that the digital record did not capture, competing claims from previous allottees whose leases were cancelled but not formally extinguished, agricultural land conversion permissions that require the District Collector's approval on a timeline the development authority cannot control, and environmental clearances that depend on whether the parcel falls within an ecologically sensitive zone not reflected in the revenue records. The portal shows land. The file reveals why that land cannot be transferred.
Regulatory exit reveals a structural design problem. The process of closing a company involves sequential engagement with agencies that do not coordinate: the Registrar of Companies (RoC), the Income Tax Department, Goods and Services Tax (GST) authorities, the Employees' Provident Fund Organisation (EPFO), and the Employees' State Insurance Corporation (ESIC). Each must independently confirm no outstanding obligations. There is no mechanism to process these in parallel.
An investor who wants to close a subsidiary that has no disputes, no liabilities, and no employees can still spend two to three years obtaining sequential clearances from agencies that have no institutional incentive to expedite the process.
The announcement-implementation mismatch is the most systemic barrier. A sector may be open to 100% FDI under automatic route at the Department for Promotion of Industry and Internal Trade (DPIIT) level. The investor files on the National Single Window System (NSWS). The application reaches the state, which in most cases has chosen "reverse integration," meaning it operates its own system and simply updates the NSWS dashboard after processing. The application then enters the state's own machinery: industries department, revenue department, pollution control board, electricity board, municipal authority. The single window opens onto a corridor with seventeen doors, each controlled by a different authority, none of which has been told to coordinate with the others.
The Vodafone retrospective tax episode remains the most consequential illustration of regulatory uncertainty at the sovereign level. In 2012, Parliament amended the Income Tax Act retrospectively to override the Supreme Court's judgment in Vodafone's favour on the taxability of its 2007 acquisition of Hutchison's India assets, imposing tax liability on a transaction the highest court had ruled was not taxable. Vodafone won international arbitration under the India-Netherlands bilateral investment treaty; Cairn Energy prevailed in a parallel arbitration over a similarly retrospective demand. In 2021, the government repealed the retrospective provision and refunded the amounts collected, a self-correction that took nearly a decade and cost India measurable reputational damage in every sovereign wealth fund and PE fund's India risk assessment. But the correction came after the bilateral investment treaties had been terminated, after the Model BIT had narrowed investor protections by requiring exhaustion of local remedies before international arbitration and removing most-favoured-nation clauses, after India had terminated over fifty existing BITs, and after the signal had already been absorbed by every global allocator evaluating India deployment.
The Insolvency and Bankruptcy Code, enacted in 2016, is the counter-example that makes the institutional observation precise. The IBC created a new adjudicating architecture through the National Company Law Tribunal and the National Company Law Appellate Tribunal, staffed its own cadre of Insolvency Professionals regulated by the Insolvency and Bankruptcy Board of India, and imposed statutory timelines on resolution proceedings that earlier frameworks had never attempted. In its first five years, the Code restructured thousands of crores of stressed assets, yielded specific precedent-setting resolutions including Essar Steel and Bhushan Steel, and changed the negotiating dynamic between promoters and lenders in ways the prior Sick Industrial Companies Act framework had not. The institutional limit that has surfaced since is the one the Commercial Courts architecture also encountered: the NCLT and NCLAT, though new institutions, have been staffed and resourced at a scale that has not kept pace with the filings, and the 270-day statutory resolution timeline is now routinely exceeded with judicial extensions. The Supreme Court's interventions on IBC interpretation have periodically reopened settled questions on Section 29A promoter eligibility, on the treatment of operational creditors, and on the waterfall of distribution. Structural reform that builds new institutions rather than adding layers to existing ones does yield faster outcomes in the first institutional generation; whether the second generation will continue to deliver without reform of its own resource architecture is now a live question.
The reason acknowledgment has not translated into resolution is that each barrier is owned by a different part of the institutional architecture, and no single authority has the mandate or the political incentive to resolve them. Contract enforcement sits with the judiciary. Land titles sit with state revenue departments. Regulatory exit requires sequential clearances from RoC, IT, GST, EPFO, and state labour departments. Everyone acknowledges the barriers because they are obvious. No one resolves them because the resolution requires coordination across jurisdictions that the system is not designed to yield.