Opinion For a Viksit Bharat, India needs to cut down on its regulatory cholesterol

Alas, this is not the reality for India’s employers, as research from the think tank Prosperiti demonstrates. Can women in India work the same jobs and the same way as men? No, they are banned from 32 operations and 200 sub-processes, including pottery manufacturing, cashew-nut processing, and glass manufacturing. Can employers think about hiring men and women for night shifts similarly? No: Women attract 59 special conditions for employers across states. Can factories use all their land? No: Fifty per cent of an industrial plot is lost to just three standards; micro and small factories lose the most land to standards more stringent than those of countries 10 times richer. Can workers work the hours they want? No: A factory worker loses 270 plus hours of annual earnings to working hour restrictions, and these limits force workers to give 156 to 416 fewer hours in a quarter than in Japan. Is building one 300-worker factory cheaper than two 150-worker factories in India? No: One 300-worker factory needs 40-80 per cent more land than two 150-worker factories. Do India and Singapore require the same number of floors to build a hotel with the same number of rooms? No: The same number of rooms requires three floors in Singapore and seven in Noida. Can all of rural India industrialise? No: Fifty per cent of rural areas cannot be industrialised due to minimum road width norms.

Our regulatory burden for employers — thousands of laws, compliances, filings and criminal provisions — represents what F A Hayek called the “pretence of knowledge” in his Nobel Prize acceptance speech in 1974. He argued against the idea of thinking about the economy as a machine that can be controlled with precision, highlighting the limitations of human knowledge and the importance of recognising the complexity of economic processes. Hayek emphasised that the actions of individuals drive economic systems, and it is a dangerous illusion that any single individual or group has all the necessary information or knows what is best for everyone. Viksit Bharat by 2047 requires deregulation.

This deregulation does not mean lower government spending, poorna swaraj for employers, or fewer government employees. A modern state is a welfare state, and government spending on social security, infrastructure, and defence is crucial to mass prosperity. No employer regulation would be disastrous; effective and efficient markets require strong laws for consumer protection, addressing market failures, and mitigating economic externalities. But as every doctor knows, the dose makes the poison. Finally, government employment must focus manpower on law and order, municipalities, healthcare, and education. The noisiness and methods chosen by America’s Department of Government Efficiency have set back government reform globally because history suggests the most enduring change comes from sharp silver daggers rather than blunt iron hammers.

If strategy is the art of reconciling unlimited aspiration with limited resources, deregulation will enable better teamwork between what Rohini Nilekani calls samaaj, bazaar and sarkar. This requires acknowledging these three actors’ different fitrat (nature) by creating a less adversarial partnership. Throwing our crorepati entrepreneurs into the Indian Ocean may reduce inequality and improve our Gini coefficient, but it won’t help our poor. The only social security and prosperity programme India can afford is massive non-farm, high-wage job creation by formal, high-productivity employers.

The scale of India’s challenge means it cannot be finessed within existing structures and philosophies. Once that is accepted, unpleasant truths await. The massive culling of regulatory compliance, filing, and jail provisions required to improve the ease of doing business for small entrepreneurs now equals civil service reform. India cannot be run from Delhi; we must devolve funds, functions, and functionaries to state capitals, despite new analysis from Niti Aayog and the think tank NCAER showing states’ dismal fiscal and debt situation. The journey from India’s first government budget of Rs 198 crore in 1947 to spending over Rs 100 lakh crore has delivered many good outcomes, but we must slow down spending and public debt growth if we aspire to be good ancestors.

Poetry in Kashmir, where I grew up, often reminded us that sustainability and happiness are found in aligning your justuju (strategy, quest or means) with your arzoo (dreams, goals or ends). Every Indian policymaker’s goal has remained unchanged since 1947: Mass prosperity. However, delivering on that goal requires a change in strategy: Signalling that entrepreneurship is permitted until prohibited by culling the regulatory cholesterol holding India back.

The writer is the co-founder of Teamlease Services