The government is in the process of establishing a deregulation commission aimed at reducing regulatory burden and enhancing the ease of doing business. Considerable work has already been undertaken to reduce compliance requirements, and the commission is expected to be officially launched by mid-April.
The concept of a deregulation commission was first introduced in the Union Budget for financial year 2025-26. The primary objective is to further reduce the role of the state in governance. While the government has already eliminated hundreds of compliance requirements, the focus now is on reforming outdated regulations and promoting ease of doing business through initiatives like Jan Vishwas 2.0. Recent examples include the overhaul of income tax laws, rationalisation of labour regulations, and decriminalisation of certain business laws. More such reforms are on the horizon.
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Composition and stakeholder collaboration
Given the broader goal of reducing direct government intervention, the commission is expected to comprise professionals from the policy sector, serving as intermediaries between the government and industry. Senior bureaucrats, including the cabinet secretary and finance secretary, are also expected to play a pivotal role in overseeing the process. To create an investment-friendly regulatory ecosystem at the state level, the central government is engaging with all stakeholders, including state governments, public sector professionals, and industry representatives, to shape the final framework.
The Economic Survey 2024-25 emphasised the importance of deregulation, particularly for micro, small, and medium enterprises (MSMEs), as a means to enhance the ease of doing business. It outlined a three-step framework for states to review their regulations:
Identifying redundant rules.
Conducting comparative analysis.
Assessing the financial impact on enterprises.
The survey also highlighted global deregulation models, emphasising the urgent need for India to streamline its regulations to tackle export hurdles, environmental concerns, energy constraints, and emissions.
Global examples shaping deregulation commission
Several countries have undertaken deregulation initiatives that have significantly influenced economic growth. In the United States, sectors such as trucking, railroads, and airlines have experienced deregulation, with mixed outcomes. The financial services industry has seen cycles of regulation, deregulation, and re-regulation in response to economic events.
Proponents argue that deregulation fosters competition, economic freedom, and innovation. Successful examples, such as Japan and China, demonstrate how deregulation has played a crucial role in driving investment and growth. India’s ambitious goal of increasing investment from 31% to 35% of GDP to sustain 8% growth necessitates decisive regulatory reforms.
Risks and concerns
Despite its benefits, deregulation is not without risks. Excessive deregulation can lead to unethical business practices, reduced transparency, and harm to consumers, workers, and the environment. The removal of regulations concerning health, safety, environmental protection, and consumer rights could result in serious negative consequences.
A case in point is the recent Federal Trade Commission’s ‘Junk Fees Rule’ in the US, which prohibits hidden fees in ticket and hotel pricing. Such regulations are essential for consumer protection and could be jeopardised by excessive deregulation.
History also offers cautionary lessons. The rapid deregulation of financial markets in the US contributed to the subprime mortgage crisis and the 2007-2008 financial crash, leading to the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to rein in risky financial practices.
The question of whether deregulation is beneficial or detrimental to India is not a simple binary choice. The government faces the challenge of balancing economic growth with necessary safeguards. While deregulation can spur investment and efficiency, overly aggressive reforms could lead to labour exploitation, environmental degradation, and weakened consumer protections.
A pragmatic approach is required—one that simplifies redundant regulations hindering progress while ensuring robust oversight mechanisms to protect citizens and natural resources. The key lies in achieving a delicate equilibrium that fosters economic dynamism without compromising social and environmental well-being.