Deregulation at what cost?

Time of India

02-05-2025

Yadul Krishna is a policy economist and a legal fellow at Governance Innovation Labs. As the Parliamentary Secretary to a Rajya Sabha MP, he drafted "The Bhagat Singh National Urban Employment Guarantee Bill, 2022," successfully introduced in the 2022 Monsoon Session of Indian Parliament. He previously worked as a finance professional in an investment services company and was briefly a columnist with the British Herald. Krishna's writings on the economy and governance have appeared across the globe, with multiple translations into other languages and have been referenced in research papers and newspaper editorials. An alumnus of SRCC, he is currently pursuing law at the Faculty of Law, University of Delhi. He tweets @Yadul_Krishna LESS ... MORE
The introduction of the Deregulation Commission, staffed by technocrats and policy consultants with little to no mandate for public consultation, echoes a problematic shift in governance—one that privileges executive discretion over democratic process.
On April 25, 2025, the Union Government announced the formation of a Deregulation Commission under the broader framework of the Jan Vishwas 2.0 initiative. This body is tasked with identifying and eliminating redundant or outdated compliance obligations in sectors including energy, telecom, logistics, and manufacturing. The aim, the government claims, is to streamline administrative processes, reduce friction for businesses, and invigorate economic growth by eliminating the burdens of regulatory red tape. At first glance, the move appears to carry the promise of economic efficiency. However, its long-term implications raise important questions about the role of the state, the future of federalism, and the protection of public interest in India's developmental trajectory.
The Rhetoric of Reform and the Reality of Deregulation
The stated rationale behind the Deregulation Commission is not unfamiliar. Cumbersome regulations, time-consuming permits, and overlapping jurisdictions have long been cited as deterrents to enterprise, particularly for small and medium-sized businesses. In its final 2020 edition, the World Bank's Doing Business report placed India at 63rd among 190 economies, identifying weaknesses in areas such as contract enforcement and dealing with construction permits. However, the report was later scrapped by the Bank itself due to data irregularities and political interference, revealing the perils of relying on efficiency indices without interrogating their underlying assumptions.
While regulatory reform is indeed necessary, deregulation cannot be synonymous with indiscriminate dismantling. The existing compliance framework, though flawed, serves vital public functions: it regulates emissions, enforces minimum wages, protects workplace safety, ensures transparency in financial transactions, and governs public procurement. If these checks are weakened in the name of agility, the result will not be reform but a weakening of the state's protective capacity.
Environmental concerns are particularly germane. Since the 2020 draft Environment Impact Assessment (EIA) notification, successive governments have attempted to dilute environmental safeguards in the name of 'ease of doing business.' The Deregulation Commission risks accelerating this trend by bypassing established procedures for public consultation and environmental scrutiny, effectively excluding communities most affected by extractive development—Adivasi populations, agrarian villages, and forest-dependent households.
Centralisation and the Federal Imbalance
One of the less discussed yet crucial dimensions of the deregulation project is its centralising tendency. The Commission operates as a central body, without any constitutional mandate to consult states or engage sub-national governments in its agenda-setting. This is troubling in a federal polity like India, where states have historically tailored compliance frameworks to their own socio-economic contexts. Kerala's robust environmental due diligence practices or Tamil Nadu's historically active labour welfare boards cannot be collapsed into a one-size-fits-all model that privileges uniformity over responsiveness.
The Union's expanding executive footprint in economic governance—whether through centrally framed labour codes, direct benefit transfer systems with limited state discretion, or now, deregulation templates—has effectively diluted the constitutional balance envisioned in the Seventh Schedule. Without formal mechanisms for intergovernmental consultation, the Commission could reduce states to administrative extensions rather than co-equal partners in economic reform.
Disproportionate Gains, Uneven Burdens
The promise of deregulation rests on the hope that reduced compliance burdens will attract greater investment, stimulate job creation, and improve India's global competitiveness. Yet empirical evidence for such trickle-down benefits remains sparse. A 2023 Reserve Bank of India bulletin noted that while India had seen an uptick in FDI inflows, employment elasticity in the organised sector remained weak. CMIE's data from March 2024 showed that over 400 million Indians continue to work in the informal sector, with scant access to social protection .
What this indicates is that deregulation, in practice, often benefits capital more than labour. In the last five years, corporate tax collections have declined even as incentives have multiplied. While the 2023-24 Union Budget offered ₹1.09 lakh crore in revenue foregone through corporate exemptions , key welfare schemes like MGNREGA saw allocations slashed from ₹73,000 crore in FY22 to ₹60,000 crore in FY23 . PM Awas Yojana (Urban), despite a growing housing deficit, was capped at ₹25,103 crore in the same year . These trends reflect a narrowing fiscal imagination—one that underwrites corporate certainty while shrinking the public provisioning net for the majority.
Moreover, labour law 'reforms' introduced since 2020 have increasingly tilted the balance of power away from workers. The Industrial Relations Code allows for retrenchment of up to 300 workers without state permission, effectively legalising precarious employment. In such a policy environment, further deregulation without parallel institutional strengthening could entrench inequalities rather than mitigate them.
Reform That Deepens Democracy
India does need regulatory reform. Many of its laws date back to colonial times or reflect outdated economic models. But the process of reform must itself be democratic, consultative, and transparent. The Deregulation Commission, as currently constituted, is neither accountable to Parliament nor required to engage with civil society, labour unions, consumer rights bodies, or ecological experts. This absence of participatory architecture undermines the legitimacy of its mandate.
What is required is not the wholesale dismantling of the state's regulatory role, but a reimagining of it. A democratic reform process would begin by auditing existing compliance burdens, disaggregated by sector and region. It would then involve state governments and key stakeholder groups in shaping sector-specific reforms that balance growth with sustainability and inclusion. Reform, in other words, must be dialogic, not technocratic.
India is at a moment when the language of governance is being rewritten—away from participation and towards efficiency, from social protection towards deregulation, and from federalism towards executive centralism. While these shifts may deliver short-term gains on paper, they risk undermining the constitutional ethos that frames economic policy not just as a function of growth but as a vehicle for justice and equity.
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Views expressed above are the author's own.