Need nuts-and-bolts reforms, industry must invest in R&D: NITI Aayog's Gauba

New Delhi: India’s next set of economic reforms needs to be granular, nuts-and-bolts changes that reduce regulatory friction, said NITI Aayog member Rajiv Gauba on Monday, while also urging Indian industry to sharply raise investment in research and development.

“What is needed now is nuts-and-bolts reforms: the unglamorous, the granular, but vital change for businesses to open, operate, and to shut down when necessary,” Gauba said referring to the government’s idea of ‘Jan Vishwas.’

“The next-generation reforms must make a clean, decisive break from the colonial mindset of distrust of citizens and punishment even for small violations to trust-based governance,” he said, speaking at the Confederation of Indian Industry’s annual business summit.

Gauba said that although the country dismantled industrial licensing in 1991, the license raj continued. “Licensing re-emerged by proxy in many areas. Every permission required before a firm can be established and can start working is a license by another name,” Gauba said, referring to requirements such as food safety license, environmental clearance and quality control certifications.

Gauba said the most critical requirement for the country to bridge the gap between its potential and what is actually realized is to cleanse the system of “regulatory cholesterol” with a comprehensive exercise of deregulation.

Since 2014, over 42,000 compliances have been eliminated and 3,700 provisions decriminalized. This exercise has to be carried to its logical conclusion, he said.

Gauba, who heads the high-level committee on regulatory reforms set up last August, said, as the fastest-growing major economy for several years, India has become a very consequential economy, contributing to the incremental global GDP every year in a big way. “We now need to sustain this high economic growth momentum for many, many years to come,” Gauba said.

The committee has proposed a set of “first principles” for regulation, including limiting licensing requirements only to areas involving national security or activities posing serious risks to human health or the environment.

He also said India has a demographic dividend, digital public infrastructure, and a leadership committed to reforms and a vast market. “But we should be an attractive proposition as a global production and innovation house, not just for domestic consumption."

There are other countries vying for the redirected investment, so "we must introspect whether we have been able to take full advantage of these propitious conditions. We should be able to replicate the Apple story multiple times over,” said Gauba.

While the government will continue with the reform agenda, the industry will need to focus on R&D, he said.

India's gross expenditure on R&D is low; it has remained well below the global average and far below that of countries like South Korea and Israel.

“Indian industry must invest more in R&D and shift from importing technology to creating it. R&D investment is not a cost, it's a strategic imperative.”

The official also said that Indian industry needs to shed its instinct for protectionism. “The Government has entered into landmark trade agreements with the UK, EU, and New Zealand. Many others are on the anvil. These will open vast new markets to Indian exporters. But the logic of free trade requires reciprocity.”