New Delhi, Jan 31 (IANS): Faster economic growth is only possible if the Union and state governments continue to implement reforms that allow small and medium enterprises to operate efficiently and compete cost-effectively, said the Economic Survey 2024 on Friday.

Tabled in Parliament by Union Finance Minister Nirmala Sitharaman, the Survey recommended reducing excessive regulatory burdens, saying governments can help businesses become more efficient, reduce costs, and unlock new growth opportunities.

"Regulations increase the cost of all operational decisions in firms," it noted.

Recognising that the government has implemented several policies and initiatives over the last decade to support and promote the growth of MSMEs, the Survey said some challenges in the regulatory environment remain.

Regulatory compliance burden holds back formalisation and labour productivity, limits employment growth, chokes innovation, and depresses growth.

The Survey observed a tendency for firms in India to remain small and the logic for it often is to remain under the regulatory radar and steer clear of the rules and labour and safety laws.

It said that the biggest casualties of this are employment generation and labour welfare, which most regulations were originally designed to encourage and protect, respectively.

The Union government has undertaken deregulation by implementing process and governance reforms, simplifying taxation laws, rationalising labour regulations, and decriminalising business laws.

"On their part, states have also participated in deregulation by reducing compliance burdens and simplifying and digitising processes," said the Survey.

Stating that such efforts have laid the foundation for states to embark on the next round of reforms now, the Economic Survey 2024-25 has outlined a three-step process for states to systematically review regulations for their cost-effectiveness.

The steps include identifying areas for deregulation, thoughtfully comparing the regulations with other states and countries and estimating the cost of each of these regulations on individual enterprises.

The survey highlights that Ease of Doing Business 2.0 should be a state government-led initiative focused on fixing the root causes behind the unease of doing business.