THE REGULATORY HURDLES AND ECONOMIC GROWTH OF INDIA
This article by Gurcharan Das highlights the regulatory hurdles stifling India's economic growth and proposes "low-hanging fruit" reforms.
It is highly relevant for UPSC General Studies Paper II (Governance) and Paper III (Economy).
Key Challenges Identified
* Regulatory Overload: Indian companies face a staggering 1,536 acts, 6,618 filings, and 69,233 compliances. Nearly half of these carry potential jail sentences, creating a climate of fear for MSMEs.
* Structural Issues: 45% of the workforce is still stuck in low-productivity agriculture; India’s share of global exports remains low (approx. 2%); and it attracts only 1.3% of global tourists.
* Competitive Disadvantage: High compliance costs and restrictive land/labour laws make India less attractive than Vietnam for companies moving out of China.
* Infrastructure & Policy Gaps: Lack of cold chain infrastructure leads to 1/3 of produce rotting; "anti-science" attitudes toward GMO/Gene-editing hinder a second Green Revolution.
Proposed "Low-Hanging Fruit" Reforms
1. Administrative & Regulatory
* Trust-Based Governance: Move away from "Inspector Raj" by scrapping most licenses and permits.
* Decriminalization: Convert minor procedural violations from criminal offences into civil penalties to improve the Ease of Doing Business (EoDB).
* Digitization: Enable all filings to be done digitally to reduce bureaucratic friction.
2. Sector-Specific Interventions
* Manufacturing: Use the Production Linked Incentive (PLI) scheme to court global brands (like Apple) to create formal, labor-intensive jobs.
* Tourism: Simplify the approval process. Currently, an Indian hotel needs up to 98 approvals (compared to 7–20 in competing nations) and faces restrictive Floor Area Ratio (FAR) regulations.
* Agriculture & Tech: Accept GMO and gene-editing science to improve crop shelf-life and yields. Encourage global e-commerce players to build cold chains by allowing them to hold and transport inventory.
3. Financial Inclusion
* RBI Compliance: Streamline scattered regulatory directions. The article cites a specific example where a ban on "locking smartphones" for EMI defaults inadvertently choked credit access for low-income youth.
UPSC Takeaways: Potential Themes
* Ease of Doing Business: Moving from "Command and Control" to a "Facilitator" model.
* Job Creation: Shifting redundant agricultural labor to labor-intensive manufacturing.
* Technology in Agriculture: The role of Biotechnology (GMOs) in food security and reducing post-harvest losses.
* Bureaucratic Reform: Changing the incentive structure of the bureaucracy to prioritize outcome over process.
Prectise Question
"Critically examine the regulatory hurdles that hinder India's transition to a global manufacturing hub. Suggest measures to improve the Ease of Doing Business (EoDB)." (150 Words)
Model Answer Structure
Introduction: India’s ambition to become a global manufacturing hub is often constrained by "regulatory cholesterol"—a term used to describe the web of complex compliances that stifle industrial agility and global competitiveness.
Regulatory Hurdles:
* Compliance Burden: Firms navigate over 69,000 compliances and 1,500+ acts. The "criminalization" of minor procedural lapses creates an environment of fear for entrepreneurs.
* Factor Market Rigidities: Difficulties in land acquisition, restrictive labor laws, and high logistics costs (due to poor cold-chain infrastructure) make Indian exports less competitive than peers like Vietnam.
* Administrative Friction: An "Inspector Raj" mindset persists, where businesses require excessive approvals (e.g., 98 for a single hotel), leading to delays and "rent-seeking" behavior.
* Policy Inconsistency: Sudden regulatory shifts (e.g., in e-commerce inventory rules or financial directions) create uncertainty for global investors.
Suggested Measures:
* Trust-Based Governance: Shift from a "permit-license" regime to self-certification and a "deemed approval" system.
* Decriminalization: Convert technical/procedural defaults into civil penalties to enhance the Ease of Doing Business.
* Single Window Clearance: Implement a truly integrated digital portal for all state and central clearances.
* Technology Integration: Adopt GMO science in agro-processing and leverage PLI schemes to build labor-intensive ecosystems.
Conclusion: By plucking the "low-hanging fruit" of administrative reform and decriminalizing the economy, India can transition from a protected market to a competitive global factory, ensuring "Sabka Saath, Sabka Vikas."
Quick Revision Mindmap
* Data Point: 45% of workers are in agriculture (redundant labor).
* Solution: Labor-intensive manufacturing (e.g., Apple’s iPhone model).
* Goal: Move from 1.3% of world tourism and 2% of exports to a dominant global share.