Regulatory reforms critical for India's push towards Viksit Bharat

As India charges ahead on achieving its vision of a Viksit Bharat, there will be two primary drivers on this journey – moving the needle on per capita income from $2,500 to $14,000; and raising the investment to GDP ratio by 300 bps. Unarguably, policy and regulatory reforms will play a critical role in achieving the twin goals.

While several government initiatives towards policy and legislative reforms are of critical importance, the challenges faced are more internal than external. For example, Ease of Doing Business (EoDB) has been an initiative that has progressed considerably. However, while India received $237 billion of FDI between 2019 - 2023 for investors, the real challenge commences when the projects have to be set up, commissioned and on commencement of commercial production. A plethora of regulations await the investor, each with its complexity. That’s where EoDB first kicks in. Clearly, there is a need for reforms that would help investors and in turn drive the India growth story forward.

> Grassroots-level reforms: Land is a key factor of production and an important building block of the economy. Creating a land database and digitising it is an important land reform that will help both industry and agriculture. There is a need for a unified land code that can substitute and/or subsume various land laws. 

> District Administration - a key enabler: The government should empower the District Administration to handle projects within their jurisdiction by co-opting experts from industries, labour, environment and taxes — areas where issues usually arise in the first three to five years after the commencement of commercial production. In fact, the District Magistrate should be fully empowered to resolve all issues that the industry faces in the initial years. I believe that this will help projects to stabilise and grow faster.

> Licencing should be re­placed by notification/self-regulation: Licensing and prior permissions to start commercial manufacturing should remain only for sectors that require compulsory licencing under the Industrial Policy or the Consolidated FDI Guidelines. For example, the FMCG Industry, a Rs 6 trillion industry, still requires licencing in most parts and should instead be allowed to commence manufacturing after they comply with mandatory quality and safety standards.

> Sector regulator vs sector facilitator: Increasingly, sector regulators have been created and rightfully so. Except that the job of the sector regulator is also to facilitate the sector and act as a sector facilitator. Sector regulators should nurture and help grow the sector. That should be their primary role. However, if any constituent of the sector crosses the line, it should be exceptionally sanctioned. This approach will require a change in mindset that goes beyond merely a relationship of a regulator and regulated. 

> Decriminalisation: Gove­r­n­m­ent’s initiative on decriminalisation of offences is noteworthy. Jan Vishwas has indeed been enacted with the right thinking. It is important that areas that have not been covered in Jan Vishwas 1.0 are covered in Jan Vishwas 2.0. All legislations that mandate compounding of offences by paying a compounding fee can prescribe a fee in the regulation to guide the industry in making compliance. The amount collected as a fee can be used to upskill the field staff and educate the industry. As a nation, we have to come out of this litigious mindset. Some of the new legislations provide for mediation which is a forward-looking step and should be encouraged.

> Corporate reforms: Merg­ers are an indicator of economic activity in the country and sanctioning schemes for M&As should be fast-tracked. For example, mergers between listed companies should not require sanction of the scheme by two NCLTs but only the NCLT that has jurisdiction over the company that is merging. The resultant company can be investigated if required after the merging company is no longer in existence. As a result of this decluttering of NCLTs, the government will realise revenue faster; companies will integrate faster, and shareholders will get the benefit of integration faster. 

> Graded compliance regi­me: To usher in a culture of compliance, the obligation has to be proportionate to the degree of compliance achieved. Companies that have a track record of compliance should be left to self-regulate and those that still have a distance to cover can be subjected to a higher degree of compliance. This will encourage the latter to catch up with the former. Laws should be made to encourage compliance and embed a culture of compliance.

Some of the above thinking may sound radical but is not ahead of time especially when we think of the goals that we have in mind as a country, they can provide big unlocks to achieving the vision that we have set out for ourselves as a nation.

The author is Executive Director, Legal & Corporate Affairs and Company Secretary, Hindustan Unilever Limited. The views are personal.