Opinion
Red-tape relief: Six things India’s regulatory reform committee must do
Summary
- The announcement of a high-level panel on regulatory reforms is a breath of fresh air. Regulations should be guard-rails, not booby traps. It’s time to slash red tape, simplify laws and inject logic into governance.
In 2011, a British bakery was fined for selling metric bread rolls instead of the traditional imperial ones—because, apparently, the greatest threat to public order was a rogue baguette. This kind of regulatory absurdity will not come as a surprise to people in India, and that is exactly why the finance minister’s announcement of a High-Level Committee for Regulatory Reforms (HLC) is a breath of fresh air.
The word ‘regulation’ comes from the Latin ‘regula,’ meaning ‘a straight stick’—but in India, regulations resemble a pretzel, twisted beyond recognition.
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To untangle this mess, the panel should follow these principles: Cut redundant rules instead of layering new ones, bury outdated ‘zombie laws,’ make inspections predictable, go digital to end the ‘stamp-and-sign’ culture, trust businesses with self-certification, and—most importantly—hold regulators accountable for delays. There are six broad areas where the HLC should intervene.
First, regulatory design is a crucial yet often overlooked aspect of economic governance. While laws, rules and regulations may be well-drafted in terms of language and intent, their structural coherence, consistency across statutes and practical enforceability often remain fragmented. Poorly designed regulations create compliance uncertainties, increase transaction costs and stifle business efficiency by embedding redundancies and contradictions.
A comprehensive review of all Acts, subordinate rules and regulatory frameworks affecting businesses is essential for their simplification and ensuring logical, risk-proportionate and outcomes-focused regulation. The HLC must undertake a first-principles re-assessment, scrutinizing the foundational architecture, rather than merely making incremental modifications.
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Second, the HLC should ensure that provisions that impede the Ease of Doing Business (EoDB) agenda, including penal provisions—such as fines, imprisonment or other punitive measures—reside in the rules rather than the parent Act. Amending an Act takes parliamentary approval, a process often hindered by legislative inertia, even when minor modifications could make a significant difference. Rules, in contrast, can be revised via executive action, which can ensure adaptability and responsiveness.
Third, the HLC should recommend sunset clauses for certain types of regulations. This approach offers two key advantages. First, it ensures that ineffective or outdated laws automatically lapse after a predefined period. Second, it institutionalizes periodic reviews, compelling policymakers to re-assess the necessity and impact of regulations before their renewal.
Fourth, the panel should consolidate laws. A single employment code would be helpful. While growth drives job creation, employment elasticity has declined. Labour reforms aim to enhance flexibility, but India’s fragmented framework—with four codes—remains inadequate.
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Historically, complex labour laws with 30,000-plus compliance requirements and 3,000 filings (source: TeamLease) have inflated non-wage costs, encouraged capital-intensive production and slowed job creation. Despite codifying 29 statutes into four codes, implementation is inconsistent, with many states yet to notify rules.
A unified employment code would streamline compliance, lower costs and create a stable regulatory environment to attract investment and boost employment. Though politically demanding, this is an important reform.
Fifth, the HLC should ensure that notifications under every Act are released at fixed intervals—say, quarterly or biannually—rather than on arbitrary dates. The practice of issuing notifications anytime must end. It forces businesses to react at short notice, disrupting production cycles, supply chains and compliance plans.
Sebi, India’s securities market regulator, issued 12 circulars in January 2025, 15 in December 2024, 12 in November and 17 in October. The lack of a pre-set calendar burdens businesses with non-stop compliance responses. While the HLC will focus on non-financial regulations, such issuances are a pain-point across sectors.
Establishing a structured timeline would mitigate this. Moreover, pre-defined notification schedules allow regulators to assess the cumulative impact of changes before implementation.
Sixth, as regulatory inspections hinder EoDB, especially for small enterprises facing frequent arbitrary checks, the HLC should adopt a risk-based framework, classifying enterprises into low, medium and high-risk tiers based on compliance history, industry type and past violations. High-risk firms would face stricter scrutiny, while low-risk ones with strong compliance records would see minimal intervention.
Beyond risk-based targeting, inspections must be streamlined through time-bound assessments, except in cases involving fraud or imminent safety concerns, thus reducing the scope for rent-seeking by inspectors. Plus, self-certification and third-party verification mechanisms should be institutionalized to shift compliance monitoring from government agencies to accredited external auditors, particularly for routine matters.
Regulations should be guard-rails, not booby traps. The HLC can fix this—if it avoids the trap of recommending another panel. It must slash red tape, simplify laws and inject a modern dose of logic into governance.
The author is a public policy professional.
