Best of BS Opinion: Regulatory, factor-market reforms key to India's growth

Today's Best of BS Opinion looks at insurance FDI liberalisation, the railways' subsidy model, regulatory bottlenecks hurting investment, shifting FDI flows, and new ideas shaping US politics.

Hello, and welcome to Best of BS Opinion, our daily newsletter that wraps up the day's opinion page for you.  With foreign direct investment in insurance now raised to 100 per cent, it is expected that the higher limit will attract more global insurers, boost innovation, and strengthen governance standards. Nonetheless, challenges continue to constrain the industry's reach and credibility, notes our first editorial. Coverage remains uneven, especially in the rural and informal segments, where gaps in awareness, affordability, and distribution persist. Delays in claim settlement and disputes over payouts have further weakened public trust. The success of reforms will depend not just on ownership liberalisation but on how well regulatory flexibility, consumer protection, and last-mile delivery are balanced.  The cross-subsidisation of passenger travel by freight revenue remains a key structural problem with Indian Railways. On average, passenger tickets are subsidised by 45 per cent. This must change, says our second editorial. A new report from the Parliamentary Standing Committee on Railways argues for diversifying cargo, more freight corridors, and income streams beyond freight. Rates have been stable since 2018, and the committee has suggested that the Railways conduct an annual assessment to ensure rates remain competitive in relation to those of other modes of transport. If the Eighth Pay Commission raises the wage and pension bill from 2026, how long can freight pay for both passengers and pensions? Revenue will have to be raised from passengers, or the railways will continue to face problems.  In 2025, the Indian economy faced a series of problems, most of them linked to regulatory practices. The statutory regulatory authorities (SRAs), writes K P Krishnan, have inherited the sources of failure from the State: Too much central planning, too little rule of law, and low state capability, all bottlenecks for private investment. They also lack a strategic sense of how performance can be improved. India has developed tentacles of a deeply interventionist regulatory state, minus the knowledge of how to make regulation work. In the face of bureaucracy, small fixes will not help, what is required is foundational change, along with a deeply authentic regulatory reforms community that combines full theoretical knowledge with the gritty Indian reality.  Large investment commitments by American tech giants in the artificial intelligence (AI) infrastructure domain has brought to the fore India’s attractiveness as an FDI destination. However, there has also been a sharp increase in the repatriation of profits and FDI outflows from India. But the average risk-adjusted return on FDI investment in India remains quite attractive, write Rajani Sinha and Sarbartho Mukherjee. What the country needs to do is continue focusing on attracting stable and diversified FDI inflows. India’s attractiveness will be strengthened by continued reforms to its financial and regulatory frameworks and focusing on improving infrastructure and cutting logistics costs. Recent factor-market reforms — such as the introduction of the new and simplified labour Code — represent a step in the right direction.  Laura K Field's fascinating and important new book FURIOUS MINDS: The Making of the MAGA New Right reveals how swiftly some esoteric theories have helped to radicalise the MAGA movement, writes Jennifer Szalai. “Trumpy intellectuals” are now wielding palpable influence, even if it has been obscured by President Trump’s total lack of interest in the world of ideas. The restraining influence of conservative intellectuals that acted as a “brake and restraint” on some of the right’s uglier impulses have been replaced by bizarre ideas that act as fuel for the MAGA New Right's extremism, and its hatred of liberalism. While Fields is unsparing in detailing the deficits of liberal rationalism, she also reminds the intellectuals of the New Right that they can dream of an authoritarian regime because of the freedom and security afforded by the very liberal democracy they loathe.