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Are regulations hurting growth?
Mon, 18 Mar Pre-Open

The origin of the term 'red tape' lies in an old British Indian practice of tying all files with red tape while being carted on mules and donkeys from Delhi to the summer capital Shimla. This is perhaps an apocryphal story, nevertheless revealing. While the British left India, the system got much worse than the hardy animals that carried the files to the hills.

Indian businesses of all sizes fear the country's excessive bureaucracy is damaging its growth prospects. In a survey conducted for Regus, the global workspace provider, almost half (47%) of India's business decision-makers think that red tape is a serious threat to growth. Even according to Mr Raghuram Rajan, chief economic advisor at the Finance Ministry, there are too many regulations in India which is hurting investments.

At the macro level, many other policies such as public procurement, public-private partnership, skill development, natural resources allocation, legal reforms to cut down on delays and so on are trapped due to inter-ministerial turf battles promoted by either status quoism or vested interests. Legal reforms are mortgaged to the powerful bar that thinks they would lose if the system improves.

Macro issues can be best handled by a group of ministers with representation by states, Parliament and key stakeholders, who can debate and find solutions as a national imperative. A similar exercise at the level of the states would also be needed. These have to be non-partisan. Bodies such as the National Development Council deal with a panoply of issues and their meetings usually become state-versus-Centre dialogue, more often hostile.

At the micro level involving every possible state and local government, it is a maze. The major problem with many micro issues is that these are under the jurisdiction of states. Each state has its own peculiarities and contours that vary according to the leader in charge. Micro issues, particularly relating to the regulatory burden, can be dealt with by using regulatory impact assessments of both new and existing laws.

India needs regulations that are workable, implementable and mostly, do what they are supposed to do. There is no point in having 20 regulations and all are flouted. This will only increase the cost.

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Feb 23, 2018 (Close)