Finally, a serious effort to reduce red tape

ECONOMIC reforms seemed to have been put in the deep freezer by this government in recent years as the emphasis has been more on gaining political mileage and winning elections. The attempt to push through farm reforms met with failure and the mood has been more cautious ever since. Yet the latest crisis posed by the imposition of 50 per cent tariffs on Indian exports by the US has galvanised policymakers into action.The crisis seems to have turned into an opportunity. The aim now is to prevent any setback to growth due to the impact of tariffs. These affect not just exports but also jobs that hinge on supplying goods to the biggest market in the world.The first step was to carry out the much-delayed restructuring of the Goods and Services Tax (GST). The cut in rates as well as the reduction in slabs and efforts to remove anomalies were carried out speedily in September, soon after the US tariffs were announced in the previous month.The result was a spurt in consumption during the festival season that brought cheer to the business community after several years of tepid sales. It also enhanced the ease of doing business by ensuring that GST was made simpler to navigate, especially for small and medium enterprises.The original aim of GST was to create a single point tax but it had turned out to be a hydra-headed creature. It was a vast improvement over the earlier multiple Central and state levies but restructuring was needed to simplify and make it more business-friendly.The next step was to finally bite the bullet and notify the four codes meant to replace the existing 29 laws dealing with labour issues. This must be viewed as a much tougher proposition given the political sensitivities involved in taking decisions regarding millions of workers in the organised and unorganised sectors.The codes were actually passed in Parliament in 2020 but were neither notified nor were the rules formally laid down. Now with the codes being notified, the rules will also become a reality within the next two months.Implementation by employers may take some time. The fact is, despite trade unions' protests, the new codes provide a safety net for a much wider number of workers. These cover all enterprises, rather than only scheduled ones, and also bring the fast-widening community of gig workers under their ambit. Several of these measures have already been adopted by states. But with the Centre notifying provisions, the policies are now extended on a nationwide basis.What is most significant in terms of easing the process of doing business is the conversion of 29 separate laws having contradictory provisions into four broad codes covering all aspects of labour-related issues. These had come into force during the colonial era — from the 1930s — and remained on the statute book since then.It is now likely that these decisions have been the prelude to an even bigger reform — that of cutting red tape. A Niti Aayog committee has just submitted a report outlining plans for a drastic reduction in the regulatory cholesterol of the administrative system.Former Cabinet Secretary Rajiv Gauba heads the committee, set up in August, and has proposed wide-ranging measures to cut bureaucratic rules and procedures that have hampered developmental activity.The report comes as a breath of fresh air, especially after top bureaucrats have repeatedly claimed in public fora that deregulation can go no further at the Central level and bottlenecks are now only at the level of states. Fortunately, this committee has recognised that regulatory processes even at the Central level continue to hamper the ease of doing business.The committee has proposed a radical overhaul of the country's regulatory framework. Describing the new proposals as a part of a trust-based approach termed Jan Vishwas Siddhant, it has recommended the ending of "inspector raj" by scrapping licences, permits and no-objection certificates. It has also sought shifting routine inspections to accredited third parties. These measures will reduce the discretionary role of bureaucrats, which has remained entrenched even decades after the first round of economic reforms and liberalisation in 1991.The committee has also suggested that there should be no sudden changes in policies and a fixed timeline should be laid down for regulatory updates to ensure predictability. Penal provisions for minor or technical violations are proposed to be eliminated with such punishments only to be imposed for serious offences.A parallel Niti Aayog committee has also proposed a series of reforms specifically for micro, small and medium enterprises (MSMEs), including easing compliances under the Companies Act and expanding credit guarantees. It has sought to address issues arising out of delayed payments by government entities to the MSMEs, which has emerged as a persistent problem that directly hurts interests of this sector.The Gauba committee had earlier taken action to withdraw many quality control orders (QCOs) that had been introduced to improve the quality levels of the industry but had ended up disrupting industrial supply chains and raising compliance costs.Now, one can only hope that the latest recommendations of the committee on regulatory reforms are implemented sooner rather than later. If the aim is to promote economic development and unshackle industry from the chains that have been binding it for decades, there needs to be quick action.The latest GDP growth data showing 8.2 per cent growth in the second quarter of 2025-26 is encouraging. But the projection for the full year remains at around 6.5 to 7 per cent. India needs to grow faster. An annual growth rate of 9 to 10 per cent is urgently needed to bring India into the category of developed nations by 2047.This can be achieved by deepening reforms, as is being done in this latest drive to shrug off the effects of US tariffs. It is a pragmatic and positive move but needs to be sustained in the long run.

Finally, a serious effort to reduce red tape

Cutting regulatory cholesterol is now essential for India to sustain high growth

Sushma Ramachandran

Sushma Ramachandran

Finally, a serious effort to reduce red tape

Cutting regulatory cholesterol is now essential for India to sustain high growth

Sushma Ramachandran

Sushma Ramachandran

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