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The problem is not merely the volume of regulations but the ambiguity and inconsistency with which they are drafted and enforced. Poorly articulated legal language leads to multiple interpretations, excessive litigation, and regulatory bottlenecks. Policymakers have long focused on global optics, chasing rankings and headlines, while the realities of bureaucratic inefficiency, arbitrary enforcement, and compliance burdens at the micro level remain largely ignored.
Deregulation alone will not take India to the 8% growth trajectory required for developed economy status, but surely without it, we don’t stand a chance. Deregulation does not imply a lawless economic order where businesses operate in an unchecked vacuum. On the contrary, effective deregulation requires a governance framework rooted in trust, transparency, and risk-based enforcement.
The ideological debate should not be framed as ‘regulation versus deregulation’ but as ‘arbitrary control versus structured facilitation.’ A well-regulated economy is one where regulations are predictable, proportionate, and enforceable without stifling enterprise.
India’s quasi-socialist approach to land and labour laws has severely limited its global competitiveness. Rigid labour laws discourage formal employment, land acquisition remains an expensive and bureaucratic nightmare, and the resulting compliance maze deters investors. A high-cost, inefficient regulatory environment adds friction to businesses, reducing India’s attractiveness in the global supply chain realignment.
However, deregulation must also have a measurable impact. Reform must be assessed not just in terms of policy announcements but through concrete economic outcomes—fewer litigation cases, faster contract enforcement, reduced compliance costs, and increased new business formation. Without such metrics, deregulation risks becoming another recurring policy slogan, periodically revived but never meaningfully executed. India has already moved from EoDB to various slogans and acronyms, and deregulation must not become another empty hashtag.
Governments often regulate as an assertion of sovereign authority, mistaking control for order. The challenge is to design a governance framework that enables economic dynamism while ensuring accountability. Regulations should be designed to facilitate rather than micromanage, shifting the approach from suspicion-based oversight to trust-based compliance.
Yet, deregulation cannot be imposed from New Delhi. Since economic micromanagement happens largely at the state level, collaborative federalism is the only viable path forward. Some states have proactively dismantled rigidities in land and labour markets, but many others lag behind, creating a fragmented regulatory landscape. The Centre’s expectation that states will voluntarily undertake politically sensitive reforms is unrealistic unless incentives are clearly defined. Without alignment between the Centre and states, deregulation risks becoming a power struggle rather than an economic imperative.
A major risk of selective deregulation is regulatory arbitrage, where businesses shift operations to states with more lenient compliance requirements while avoiding stricter jurisdictions. This not only creates an uneven playing field but also reduces overall economic efficiency. A national-level framework for deregulation must ensure that state-level competition does not result in a race to the bottom.
Regulatory excess carries a measurable economic cost. Every additional compliance requirement increases transaction costs, discourages investment, and delays economic activity. Without a data-driven approach, deregulation efforts risk becoming anecdotal rather than evidence-based.While the HLC’s mandate is commendable, India lacks a permanent institutional mechanism to continuously assess regulatory efficiency. Unlike the UK’s Regulatory Policy Committee which provides ongoing oversight of regulations, India’s approach to deregulation has been episodic and politically driven.
Deregulation must also be complemented by judicial reform. Many of India’s regulatory inefficiencies stem from ambiguities in legal interpretation, leading to excessive litigation and prolonged business uncertainty. If dispute resolution and contract enforcement remain sluggish, businesses will continue to face regulatory uncertainty, even in a supposedly ‘deregulated’ environment. Legal reform must therefore be an integral part of the broader deregulation strategy.
At the heart of any serious deregulation effort must be a fundamental shift in governance philosophy: trust thy citizens. The default mode of Indian regulation has long been one of scepticism—assuming that businesses and individuals will exploit loopholes unless rigorously controlled. This mindset must change. Trust, however, cannot be a vague, discretionary concept; it must be binary, embedded into the very design of regulations. It cannot function like body temperature measurement, adjusting to 98.4 degrees based on convenience. Either businesses and individuals are trusted with compliance, or they are not. The strategic boundary of such trust lies in clear, predictable consequences for violations, rather than pre-emptive suspicion.
India’s governance crisis is not just a function of outdated regulations but of political choices. Despite numerous commissions and expert recommendations, meaningful administrative reforms that govern the bureaucracy have remained elusive. The reluctance to modernise administrative law—pending for decades—ensures that even the most well-intended deregulation efforts remain trapped in bureaucratic inertia. The question is whether India’s political leadership is willing to bear the short-term political costs of systemic reforms.
Deregulation is nation’s economic modernisation. The role of government is not to be an omnipresent enforcer but to create an ecosystem where businesses can function with clarity, efficiency, and fairness. Without deep structural reforms, it would be another policy cycle of intent without execution.
—The author, Dr. Srinath Sridharan ( @ssmumbai), is a Corporate advisor & Independent Director on Corporate Boards. The views expressed are personal.
Read his previous articles here
