Economic Survey's Central Message
The latest Economic Survey emphasizes the importance of enhancing economic freedom as a catalyst for growth, advocating for systematic deregulation by reviewing regulations for their cost-effectiveness across various parameters. This call for deregulation echoes the push for decontrol seen in India's early 1990s economic reforms.
Recent Initiatives and Proposals
- In the 2023-24 Budget speech, the finance minister urged regulators to review existing regulations to simplify and reduce compliance costs.
- The 2025-26 Budget proposes a High-Level Committee for Regulatory Reforms to review non-financial sector regulations and assess the impact of existing financial regulations.
- The Competition (Amendment) Act of 2023 mandates periodic reviews and public consultations for regulation-making processes.
Responsible Regulation
Deregulation is framed as not less governance, but better governance. It involves eliminating unnecessary regulations while avoiding the introduction of new ones. Two key elements are:
- The scope of regulations encompasses both primary and subordinate legislation, including rules, regulations, and subsidiary directions.
- The process of reviewing and making regulations integrates public consultation and economic analysis.
Role of Financial Regulators
Indian financial regulators are pioneers in transparent and consultative regulation-making processes. SEBI, in particular, initiated public consultations in 2002, setting a precedent for other regulators. Recent SEBI regulations aim to govern the regulation-making process more thoroughly.
Key Elements for Effective Regulation
- 1. Regulations must apply to all binding instruments, not just formal regulations.
- 2. Democratic legitimacy is ensured by having the governing board involved in all stages, from draft to final regulations.
- 3. Public consultation should be mandatory and comprehensive, with the board considering and responding to comments.
- 4. Multiple methods should be used for public engagement, with a public consultation index measuring effectiveness.
- 5. Economic analysis of proposed regulations should be included to facilitate informed public input.
- 6. Discretion for exemption should be minimized, except in exigent circumstances, with temporary regulations having a defined lifespan.
- 7. Biennial reviews are necessary to maintain relevance and eliminate outdated regulations.
- 8. The public should have ongoing opportunities to propose new regulations or amendments.
- 9. Regulatory certainty is enhanced by requiring legally binding clarifications from regulators.
Implementing these principles can ensure that lawmakers maintain high standards of accountability, fostering an environment conducive to sustainable economic growth while balancing the risks of over-regulation and underregulation.