Let’s Get RIA About Regulation
A Realistic Approach for Reforming India’s Regulatory Ecosystem
By Pradeep S Mehta
India’s complex and tangled regulatory framework has long hindered ease of doing business and economic progress. While reforms have been in progress, persistent hurdles remain. Chief among these obstacles is the entrenched bureaucratic status quo mindset, which resists transformative change. Recognizing this, the recent Union Budget proposed the formation of a High-Level Committee (HLC) for regulatory reforms, tasked with submitting its recommendations within a year. 
What Needs to Change
For meaningful reform, India must adopt a realistic and incremental approach. The key action points for bringing about this change include:
- Addressing ambiguities in existing laws and regulations.
- Curbing discretionary and exploitative powers traditionally exercised by bureaucrats.
- Reforming bureaucracy to encourage honesty, accountability, and efficiency.
- Adopting fixed tenures for bureaucrats, replacing the current ad hoc transfers.
- Implementing efficient alternative dispute resolution mechanisms to reduce the clogging of courts.
- Penalizing erring civil servants and rewarding honesty and integrity.
However, these measures alone are insufficient without political will and the selection of capable, reform-minded leadership to drive the change. The HLC, if it is to succeed, must be composed of individuals who can overcome bureaucratic inertia and think beyond traditional constraints. It should include non-bureaucrats of high repute, much like Nandan Nilekani.
Overcoming Institutional Gaps
One of the major drawbacks of past efforts has been the lack of institutional memory, resulting in constant reinvention of the wheel. For example, the Department for Promotion of Industry and Internal Trade’s (DPIIT) 2018 Better Regulatory Advisory Group (BRAG) produced valuable insights, but their implementation remains incomplete.
India’s regulatory ecosystem is currently bogged down by excessive compliance requirements and criminal provisions, disproportionately burdening small businesses. To create a more business-friendly environment, mandatory sunset clauses should be introduced, ensuring periodic reviews of laws and regulations. Legislative reviews and wider public consultations will improve buy-in and reduce resistance to reforms.
The Role of RIA
Institutionalizing Regulatory Impact Assessment (RIA) as a statutory requirement is essential. RIA ensures that both new and existing regulations are evaluated based on legality, necessity, and proportionality. Dedicated cross-sectoral RIA bodies should be established to safeguard public interest without stifling innovation and growth.
A tiered compliance framework, prioritizing risk-based inspections, can enhance enforcement efficiency. High-risk sectors like finance and chemicals would receive greater scrutiny, while low-risk enterprises would face fewer regulatory burdens.
Embracing Technology and Data Analytics
Technology and data analytics can revolutionize compliance. By identifying high-risk entities, such as polluting factories or financial fraud hotspots, oversight can be targeted effectively. For example, Punjab’s experimental “compliance clinics” replace adversarial inspections with collaborative troubleshooting, fostering a more business-friendly regulatory environment.
Moving Away from a Punitive Culture
India’s historically punitive regulatory culture is undergoing reform. Many laws are being amended to decriminalize technical breaches, aligning with global standards. Prosecution is now being viewed as a last resort, with corrective orders and fines prioritized for minor infractions. This shift encourages compliance through proportionality, not coercion.
The Way Forward
HLC must establish institutional mechanisms that can evolve with economic and technological changes. Regulatory bodies must foster a governance ethos centered on less government but better governance.
By reducing regulatory cholesterol, India can unlock greater private investment and innovation, creating a thriving ecosystem for businesses. However, these benefits can only be realized if the pervasive red tape is finally cut.
Writer: Pradeep S Mehta
Secretary General, CUTS International
Inputs by Amol Kulkarni and Tasmita Sengupta
