under the Modi government
Live Mint, July
By Pradeep S Mehta
The Narendra Modi government is nearing the completion of its
term. Unsurprisingly, it is keen to list its achievements in the
past four years and has deployed its entire machinery to spread
its message across the country.
One of the key success stories propagated by the government is
regulatory reform or deregulation. It involves eliminating
archaic laws and rationalizing existing laws. The objective is
to optimize regulatory stock and flow to reduce regulatory
burden on different stakeholders. This espouses the ideals of
sabka saath, sabka vikas and “maximum governance, minimum
government” conceptualized when the National Democratic Alliance
came to power. These themes are now being merged into the slogan
of “ease of living for all”, of which “ease of doing business”
is an integral part.
Since 2014, by way of four repealing and amending laws, the
government has scrapped around 1,178 laws. Of these,
approximately 335 were Acts which amended existing laws, 16 were
Acts which repealed existing laws, and 758 were Acts which
authorized appropriation of funds. Presumably, all these Acts
had outlived their utility. In other words, only around 69 Acts
were actually operational when repealed. By government’s own
admission, most of the Acts repealed were irrelevant. They had
ceased to be in force, or had become obsolete, or had lost their
meaning, or their retention as a separate Act was unnecessary.
The last repeal happened in 2015. In 2017, the government
introduced two repeal and amending Bills to scrap around 239
Acts, of which around 101 are amendment Acts, 11 are
appropriation Acts, 20 are repeal Acts and nine are ordinances.
The Bills are yet to be passed.
Repeal of inoperative legislations might not be the best tool
for regulatory reform when the objective is to highlight it as a
major achievement in making life easier for citizens or
businesses. The utility is limited to reducing the thickness of
the statute book. The government’s resources are limited and
should be judiciously used. The efforts required in
identification and repeal of such legislations may outweigh the
benefits from such repeals.
In addition to the repeals, in the past four years, the
government has amended close to 65 existing legislations and has
introduced 33 new legislations. Around 39 ordinances have also
been issued during this period. A close analysis reveals that
during the Modi regime, for every two relevant Acts repealed
(total around 69), close to three new Acts (including amendment
Acts) have been introduced (total around 98). This is not a
record to be proud of, especially when deregulation is claimed
to be one of the key success stories of the government.
The issues which new Acts relate to include the goods and
services tax, insolvency and bankruptcy, real estate, labour
laws and financial sector, among others. While these Acts intend
to address key problems and make life easier for stakeholders in
relevant sectors, it appears that this is unlikely to happen
soon. Interpretation, administration, compliance, and transition
related challenges are keeping affected parties busy, resulting
in high compliance costs. Even if prevailing issues are
addressed, new issues are expected to crop up.
Despite good intentions, the deregulation initiatives of the
government do not appear to have had significant positive
impact. This is because good processes are far more important
than good intentions in a law-making process.
Key components of a good law-making process are: clarity in
problem to be addressed/objectives to be achieved; high
likelihood of the proposed law of achieving such objectives; the
costs at which such objectives are achieved are likely to be
substantially outweighed by the benefits.
Such ex-ante assessments of objectives, costs and benefits form
the core of regulatory impact assessment (RIA) framework, a
globally recognized good practice in law making adopted by
different countries, including the UK, US and Australia. RIA can
be applied for designing new legislations as well as reviewing
the effectiveness of existing laws and designing amendments. It
is as suited for legacy issues such as regulation of small and
medium enterprises, as for emerging issues such as regulation of
two-sided markets and network industries.
For instance, the government of Maharashtra recently issued the
Maharashtra City Taxi Rules to regulate taxis linked with
app-based aggregators. Utilizing the RIA framework, we estimated
that if the rules are adopted, the per day cost to consumers and
drivers may increase by 40% and 93%, respectively (details
available at goo.gl/Hkxdio).
Similarly, the government of Rajasthan is considering amendments
to the Rajasthan Shops and Commercial Establishments Act. Based
on a rapid cost-benefit analysis, we found that the total net
monetary cost to stakeholders is likely to marginally increase
(details available at goo.gl/EinmkW). Appropriate suggestions to
reduce costs and enhance benefits were made in both cases.
Several expert committees have recommended RIA for India. At
present, the Better Regulatory Advisory Group (BRAG), chaired by
the secretary, department of industrial policy and promotion, is
considering adoption of RIA for India. As a member of BRAG, we
have suggested a model for adopting RIA in India. The government
should consider these suggestions to attain its deregulation
agenda and ensure ease of living for all.
Pradeep S. Mehta is secretary general of CUTS International.
This news item can also be viewed at: