Regulatory Reform in India: Need and Challenges

• India’s goal of becoming a $5 trillion economy and a developed nation by 2047 cannot be realised without deep and sustained regulatory reform. The term “regulatory cholesterol” aptly captures the excessive and outdated control mechanisms that burden businesses, stifle innovation, and deter both domestic and foreign investment.

Regulatory Reform in India: Statistics

Need for Regulatory Reform

• Investor Confidence Needs Predictability: Overlapping clearances and multi-agency inspections continue to deter investment, as global investors favour transparent, streamlined regulatory processes.
• Regulatory Bottlenecks Persist Despite Improvements: Entrepreneurs encounter challenges in land acquisition, licensing, and tax compliance, which slow project execution.
• Job Creation Requires Regulatory Flexibility: Regulations should support MSMEs, gig platforms, and startups, as they are crucial to India’s non-agricultural employment. E.g., 65% of population under 35.
• Centre-State Synergy Essential for Reform: Land and labour approvals require uniform national frameworks that are adaptable to local needs to encourage growth and attract investment.
• Regulatory Reform Crucial for Demographic Dividend: Enabling digital-first, trust-based regulatory systems is essential to unlock job opportunities. E.g., add over 100 million workers by 2030 (ILO).

Key Areas of Regulatory Reform

• Land & Labour Market Reforms: Simplify land conversion, acquisition, and zoning; implement flexible yet protective labour codes covering gig, platform, and informal workers.
• Simplified Inspection Regimes: Introduce single annual inspections with prior notice and standardised checklists; eliminate ‘Inspector Raj’ through digital tracking and third-party audits.
• Digital Governance & Automated Approvals: Use geo-tagged data for auto-NOCs (e.g., AAI); operationalise integrated single-window portals like Invest India and IndiaStack.
• Decriminalisation & Legal Cleanup: Repeal colonial-era legislations and decriminalise minor economic offences; e.g., Companies Act decriminalisation (2020 amendment).
• Trust-Based Systems with Accountability: Promote self-certification and third-party verification models like TS-iPASS; ensure risk-based audits to balance trust with compliance.
• Time-bound Grievance Redressal: Set clear timelines, strengthen ombudsman systems, and impose penalties for administrative delays.
• Changing Bureaucratic Mindset: Shift from control-oriented governance to facilitation; train civil servants in digital tools, economic logic, and industry needs.

Government Initiatives for Regulatory Reform

Challenges in Implementing Regulatory Reforms in India

• Centre–State Coordination Issues: Labour, land, and laws fall under state jurisdiction, leading to policy fragmentation. E.g., differing labour codes and land acquisition rules hinder uniform implementation.
• Bureaucratic Resistance to Change: Inertia and reluctance to give up discretionary powers slow reforms. E.g., delays and inefficiencies during the initial GST rollout.
• Capacity Gaps in Departments: Many departments lack technical skills and digital infrastructure. E.g., slow adoption of e-Governance in rural and semi-urban areas.
• Balancing Speed with Safeguards: Fast-tracking reforms can compromise labour and environmental protections. E.g., debates over easing forest and environmental clearances.
• Regulatory Fragmentation: Overlapping laws across jurisdictions increase compliance burden and delay approvals. E.g., inconsistent zoning laws and construction permits hamper projects.

Way Forward

• Institutionalise Regulatory Impact Assessments (RIA): Every regulation should be supported by a cost-benefit analysis to ensure it achieves its intended purpose.
• Legally Mandate Transparency: Checklists, timelines, and procedures must be published online with legal backing to prevent manipulation of procedures.
• Promote Cooperative Federalism: Centre and States must collaborate to harmonise regulatory practices, possibly through inter-state regulatory councils.
• Engage Stakeholders: Reforms must engage industry bodies, MSMEs, trade unions, and civil society to ensure buy-in and responsiveness.
• Monitor and Evaluate Outcomes: Regular audits and third-party evaluations of reform impact should inform mid-course corrections.

“Minimum government, maximum governance” must translate into minimum friction, maximum facilitation. India’s regulatory system must transition from being permission-based to one that is transparent, digital-first, and business-centric.

Reference: The Hindu

PMF IAS Pathfinder for Mains – Question 194

Q. “Regulatory cholesterol” has been a significant hurdle to unleashing the full potential of India’s economic reforms. Discuss the steps taken by the government to de-clog the regulatory system and suggest further reforms. (150 Words) (10 Marks)

Approach

• Introduction: Write briefly about “regulatory cholesterol” and mention streamlined, trust-based reforms.
• Body: Discuss the steps taken by the government to de-clog the regulatory system and suggest further reforms.
• Conclusion: Highlight the importance of regulatory reform to promote trust, transparency, and efficiency across sectors and states.