The term "Permit Raj" or "License Raj" refers to the idea that people trying to business in India's economy are not allowed to do anything without getting a permit or a license. In other words, the idea is that there is an excessive amount of "red tape" that goes along with any attempt to do business in India.
The existence of the Permit Raj can be seen as proof that Hayek's ideas are correct. Hayek argues that government regulation reduces freedom and also makes it hard for an economy to prosper. You can make the case that the Permit Raj did both of these things. It took away Indians' economic freedom to do what they wanted with their property and their skills. In addition, the difficulty of doing business in India is often cited as one of the reasons why India has not become a true economic power.
In this way, the Permit Raj can be seen as proof of the validity of Hayek's ideas.