Labelling standards: Impactful reforms can be delivered in small packages

In a complex world of regulations and policy, it is often forgotten that simple process reforms can have a very large impact. Process reforms are practical, targeted adjustments to streamline regulations or procedures within specific activities or sectors.

These are microeconomic refinements, focused on addressing particular issues through a series of minor yet impactful changes. Unlike broad structural reforms that reshape the economic framework, process reforms leave the basic architecture intact, allowing for iterative improvements through feedback loops that can yield substantial cumulative effects. One such area in need of process reforms are India’s labelling regulations.

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The objective behind packaging and labelling rules is to ensure that customers have information on the contents before purchase. However, multiple regulations and frequent changes can cause inefficiencies. Three issues need to be addressed.

First, we have too many regulations. These include the Food Safety and Standards (Labelling and Display) Regulations, 2020; Drugs and Cosmetics Act, 1940; Cosmetic Rules, 2020; Legal Metrology (Packaged Commodities) Rules, 2011; and Plastic Waste Management (Second Amendment) Rules 2022 (Rule 11(1)(a) & (b) related to labelling).

This regulatory fragmentation creates a compliance minefield for businesses, particularly smaller enterprises, that face significant financial and operational burdens in navigating these disparate standards. Non-compliance means penalties that can cripple businesses, stifling innovation and growth. Such regulatory complexity serves as a market barrier.

Second, regulations lack stability. Between 2020 and 2024, labelling regulations saw a flurry of amendments (about 28): 10 in the Food Safety and Standards Act, apart from further changes under the Legal Metrology Act and Plastic Waste Management Rules in accordance with industry representations.

In 2022 alone, companies faced nine labelling updates. In 2023, five labelling changes were recommended—three by the Food Safety and Standards Authority of India (FSSAI) and two under the Legal Metrology Act. In 2024, four more changes were added, three from the FSSAI and one under Legal Metrology Act.

Third, regulatory changes tend to be unpredictable. Sudden shifts without forewarning on arbitrary dates make it hard for businesses to adapt quickly. They get blindsided too often.

Frequent changes in labelling regulations are a huge obstacle for MSMEs, particularly those in packaging. Labels and packaging materials are typically produced in large batches and any alteration in regulatory specifications can result in entire batches being scrapped.

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This is costly for small packaging businesses that operate on tight margins and can’t absorb these costs. Sudden changes can also cause significant material wastage, posing serious sustainability concerns in an industry already grappling with environmental challenges. Greater consistency in standards would be less disruptive and more favourable to sustainable practices.

Manufacturers that use these labels for their packaging are sometimes compelled to recall products from multiple stages of their distribution networks, which places a significant burden on them by disrupting operations and raising costs at every step.

A simple process reform that can solve all these problems would be to set fixed dates—say, 1 January and 1 July every year—for any labelling-related regulatory update by any ministry.

This would give packagers and manufacturers the predictability they need to manage raw materials, production and inventory more efficiently, reducing waste and unexpected costs. The FSSAI is considering this reform. The ministry of consumer affairs should do the same for any labelling changes under the Legal Metrology Act.

A strict calendar for regulatory labelling updates could offer a practical solution to recurring problems. This idea isn’t new; it draws from successful practices in other areas. For instance, the Department for Promotion of Industry and Internal Trade has long issued consolidated FDI policy circulars (initially twice a year), consolidating press notes and updates in a single document for easy reference.

This schedule of policy updates is widely appreciated by foreign investors. Other departments and regulators should take note. In October 2024, the Securities and Exchange Board of India issued 18 circulars with varying implementation dates.

We are not concerned with the content of the notices, but with their frequency. A more efficient approach would be to consolidate circulars and release them only monthly, say on the first Monday, allowing stakeholders to plan and implement changes smoothly. Exceptions could be made in urgent cases.

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Process reforms may seem minor but hold transformative potential for businesses, particularly MSMEs. By enabling better planning, minimizing unnecessary stock adjustments and cutting costs, such reforms will signal India’s commitment to reducing regulatory friction.

As the regulatory landscape matures, they will pave the way for a more transparent, stable and growth-oriented business environment.

The authors are, respectively, member and officer-on-special-duty, research, at the Economic Advisory Council to the Prime Minister.

These are the authors’ personal views.