Embrace deregulation to let businesses prosper, says Chief Economic Advisor
Economic Survey 2024-25 advises Union and State governments to stop micromanaging economic activity, embrace risk-based regulations
New Delhi: Give entrepreneurs and households back their time and mental bandwidth, Chief Economic Advisor V Anantha Nageswaran said while making a strong case for significant roll back of regulations both by the Union and State governments.
In the Preface of the Economic Survey 2024-25, he said, “Getting out of the way” and allowing businesses to focus on their core mission is a significant contribution that governments around the country can make to foster innovation and enhance competitiveness. “The most effective policies governments – Union and States – in the country can embrace is to give entrepreneurs and households back their time and mental bandwidth. That means rolling back regulation significantly. That means vowing and acting to stop micromanaging economic activity and embracing risk-based regulations,” Nageswaran wrote.
Effective government policies also mean changing the operating principle of regulations from ‘guilty until proven innocent’ to ‘innocent until proven guilty’. Adding layers of operational conditions to policies to prevent abuse makes them incomprehensible and regulations needlessly complicated, taking them further from their original purposes and intents, said Nageswaran, who led the team which authored the key pre-Budget document.
Observing that there is no choice but to trust the people, he cautioned that “business as usual carries a high risk of economic growth stagnation, if not economic stagnation”. “Yes, trust is a two-way street and the non-government actors in the economy have to vindicate the trust reposed. In fact, quite a significant chunk of the complicated compliance requirements stem from the efforts of businesses wanting to keep out domestic and foreign competition to the detriment of other industries and the economy,” he added.
The chief economic advisor emphasised that wiping out the trust deficit in the country as it is imperative and government agencies have to set the agenda in this regard. “Then, it is a good bet that the Indian public will overcome the challenges and turn them into opportunities on the way to Viksit Bharat by 2047,” he said.
The survey argues that the government needs to embrace risk-based regulations and change the operating principle of regulations from ‘guilty until proven innocent’ to ‘innocent until proven guilty’. Adding layers of operational conditions to policies to prevent abuse makes them incomprehensible and regulations needlessly complicated, taking them further from their original purposes and intents. Referring to global developments, Nageswaran said India faces limitations in producing critical goods at the scale and quality required to serve the infrastructure and investment needs of an aspiring economy.
For instance, he said India has low production capacity in the solar energy sector for key components like polysilicon, ingots, and wafers. The production capacity of monocrystalline silicon ingot is expected to quintuple by 2025 from 2 GW in 2023, but it won’t be enough to meet the demand in the country.
“Several solar equipment manufacturers in the country significantly depend on Chinese supply chains and related services. The single-source concentration risk in several product areas exposes India to potential supply chain disruptions, price fluctuations and currency risks. India’s task is cut out,” he said.
