The Economic Survey for 2024-25 emphasizes the need for deregulation to drive economic growth, improve business efficiency, and create more jobs in India. Released recently, the report highlights how cutting down on unnecessary regulations, simplifying policies, and reducing compliance costs can significantly support the growth of micro, small, and medium enterprises (MSMEs), industrial competitiveness, and overall employment generation.
India is aiming for a consistent 8% GDP growth over the next decade. To achieve this ambitious goal, the country needs to increase investments and ensure that these investments generate higher returns more quickly. The Economic Survey suggests that reducing regulatory burdens can help achieve this by improving investment efficiency and boosting overall economic productivity.
Focus on MSMEs and Economic Freedom
Micro, small, and medium enterprises (MSMEs) are often weighed down by heavy compliance costs—both in terms of time and money. To address this issue, the government has introduced reforms over the past decade, simplifying tax laws, updating labour regulations, and decriminalizing some business-related laws.
The Forest Conservation (Amendment) Act of 2023 was another step in simplifying land use regulations, helping businesses to operate more easily.
State-Level Initiatives to Encourage Investment
On the state level, several regions are also taking action to ease business regulations and attract investments:
- Haryana and Tamil Nadu have made multiple changes to building regulations to support industrial growth.
- Punjab has set up grievance redressal sessions to help businesses navigate industrial, labour, and fire regulations.
- Andhra Pradesh, Karnataka, and Haryana have eased restrictions on night shifts for women in the IT-enabled services (ITES) sector, allowing for more flexible job opportunities.
The Survey also highlights that state-level regulatory changes can greatly impact business productivity. For example, in some states, businesses lose valuable land space due to mandated setbacks, costing them millions in lost opportunities. Similarly, businesses often face delays due to outdated land use classifications, making it harder to access basic resources.
While the Survey acknowledges that some regulations are necessary, it emphasizes the need for regular evaluations to ensure they aren’t causing unnecessary delays and costs.
Enforcing Regulations: A Growing Challenge
India’s regulatory enforcement is another challenge. The Survey points out that the country often adopts regulatory standards from nations with stronger administrative capacities, which can be difficult to implement effectively. For instance, with only 644 inspectors overseeing over 300,000 factories, each inspector is responsible for hundreds of businesses, making enforcement challenging.
Modernizing India’s Regulatory Framework
The Survey also outlines steps taken by the central government to modernize India’s regulatory system:
- Jan Vishwas Act, 2023: This act decriminalized 183 provisions across 42 central laws, simplifying business operations.
- PAN 2.0 Project: Introduced a paperless system and established a digital identification system for businesses.
- Business Reform Action Plan (BRAP): Evidence shows that deregulation has led to increased industrial activity in regions that adopted these reforms.
Promoting Job Creation through Deregulation
Over-regulation often hinders business expansion and job creation. By reducing unnecessary compliance burdens, deregulation can lower operational costs, increase efficiency, and drive growth in key sectors.
For instance, labour market reforms could provide greater flexibility for industries, particularly those focused on exports. The Survey also pointed out that India’s factory laws sometimes discourage large-scale manufacturing. It’s often more cost-effective to run two smaller factories rather than a single large one due to compliance complexities.
Learning from Global Best Practices
The Survey draws on international examples to suggest ways forward. In the United Kingdom, the “one-in, two-out” policy ensures that for every new regulation, two old ones must be removed. Similarly, countries like the United States and New Zealand have streamlined their regulatory frameworks to foster business growth and job creation.
Key Policy Recommendations
To further enhance India’s economic growth, the Survey recommends:
- Liberalizing compliance procedures to make regulations more business-friendly.
- Risk-based regulation: Ensuring that enforcement is based on the actual risk posed by a business rather than imposing blanket compliance.
- Public-private partnerships (PPPs): Encouraging partnerships in regulatory enforcement, drawing inspiration from models in countries like Australia and Canada.
By adopting these measures, India can pave the way for a more vibrant, efficient, and job-generating economy.
