 "Nirmala Sitharaman, Nirmala")
In her Budget speech, the Union finance minister stated that the government was determined to ensure that regulations kept up with technological innovations and global policy developments.
A high-level committee to deal with regulatory reforms is proposed to be set up to review all non-financial sector regulations, certifications, licenses, and permissions. The committee will be expected to make its recommendations within a year. The objective is to strengthen trust-based economic governance and take transformational measures to enhance ‘ease of doing business’, especially in matters of inspections and compliances.
The Prime Minister made it even better. In his address in one of the public functions on his return from the United States, he talked about setting up a Deregulation Commission. This is a welcome move, and shows the seriousness and long-term approach of the government in streamlining regulations.
Ordinarily, big-time regulatory reforms hit roadblocks as they lead to shedding of powers, but the question is: Do we have an option? Also, given the context, this is the right thing to do. Given that it has now come both from the finance minister and the Prime Minister, there is serious intent to it.
Timely initiative
The proposal to set up a Deregulation Commission is the right step, and could not have been timed better. The country is leapfrogging to become the third-largest economy in the next few years, and, in the long run, the goal of Viksit Bharat remains not just aspirational for the 1.4 billion Indians but also something that can be achieved if we do the groundwork and lay the foundation today.
Given that we have more than a thousand regulations, the Commission will have its hands full. A few thoughts for the Commission to consider:
>Any regulatory reform programme must involve different interest groups, members of the public that bring about regular interaction with the regulator and the regulated. It should result in the welfare of the larger community.
>Consider those regulations for reform that fall in the concurrent list in our federal structure as those have a wider impact, greater complexity, and need to be addressed on priority.
>Engage with states as they have an important role to play both with respect to regulations that they enact and enforce on the ground. States should have representation on the committee and the Commission.
>Regulatory reforms are critical for laws involving the four factors of production and tech-led innovation. Land, labour, capital and entrepreneurship, and laws that relate to them have to be prioritised insofar as regulatory reforms are concerned.
>Every agency that implements a regulatory reform must have a reforms officer to oversee the reform undertaken and its review. Her role should be to seek feedback from stakeholders and look at the next level of reforms.
>Identify sectors where regulation can be replaced by quality and safety standards so that the focus shifts to quality and safety of products and services, and not to the plethora of other requirements like licensing and permissions.
>Identify those regulations for reform that can be repealed because their practical utility in today's context is low.
>Identify those regulations for reform that can be substituted with self-regulation in the form of codes of conduct, model code or codes of practice, etc, which also help build trust between the regulator and the regulated. These could be areas where the government should not involve itself, and leave the space free for self-regulation.
>Free up from prior licensing requirements under domestic regulation that are open for 100 per cent foreign direct investment (FDI). In some such sectors, premarket approval can be replaced by post-market notification, subject to adherence to quality and safety standards.
>Ordinarily and to the extent possible, adopt judicial orders that have the effect of amending, repealing any regulation instead of overcoming such orders by enacting a new regulation, unless the circumstances warrant a new regulation.
> Focus also on dismantling agencies that administer regulations sought to be repealed, thereby cutting down on government expenditure. Look at opportunities to combine government agencies as a result of regulatory reforms to bring about synergies in governance.
New regulation to be adequately tested
The Commission may consider the following factors as guidance for the enactment of any new legislation by the government in the future:
> The legislation is on a subject that requires embracing a technology, fostering innovation, solving problems in diverse areas, and while doing so, taking care of concerns like ethics, intellectual property rights, data privacy, etc. A case in point is regulation on artificial intelligence (AI). We require a balanced regulation that promotes AI and addresses the above concerns.
> Need for a legislation keeping the interest of those it is going to impact, market conditions, impact on society and the government’s ability to enforce the same.
> Experience gained from the current legislation, and is there a case for deregulation or self-regulation.
> Possible overlap with any existing regulation.
Any regulation once enacted must be reviewed for meeting its objectives every three to five years. In a bid to reduce the regulatory overload, the effort should be to repeal at least two regulations for every new regulation enacted, even if they are in unrelated areas. The thought should be to build trust and reduce overall regulation in the country.
What success will look like
Regulatory reforms will bear fruit only if they help in the relationship between the regulator and the regulated undergoing a fundamental change. This relationship must pivot from being a regulator to being a facilitator. The regulator must help the regulated in compliance and not dive into enforcement. Regulation must be simplified, and both parties should help in ensuring compliance through education, awareness building, capacity building, and mutual trust. Regulatory reforms should promote ease of doing business, foster innovation, help embrace new technologies, and become a source of competitive advantage for India. If after making the regulatory environment much more enabling, there is still no intent to comply, penal provisions of the regulation must be enforced, with consequences to follow.
The Deregulation Commission is an idea whose time has come. For India to be a Viksit Rashtra (developed country), our states have to be viksit. Internal reforms within the country insofar as regulations are concerned need to be top priority, and a Deregulation Commission would be the right vehicle to carry these reforms through for the next many years.
The writer is Advisor, Hindustan Unilever Ltd. Views are personal
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
