By Pradeep S. Mehta and Tasmita Sengupta
Prime Minister Narendra Modi has been rightly pushing deregulation as part of the Viksit Bharat-by- 2047 goal. End-June, he held a meeting with Union secretaries and may do so with the chief secretaries of states soon. These efforts will ease doing business.
In this context, the department for promotion of industry and internal trade has released its Regulatory Impact Assessment (RIA) guidebook for Union ministries and departments.
It draws upon CUTS’s RIA toolkit, which has also been annexed to it. Earlier, recommendations by several committees, the Economic Survey, Securities Market Code, 2025, and Union budget for 2026-27 had highlighted the need for RIA.
This recognition underscores a growing acceptance that deregulation cannot be pursued merely by eliminating rules; it must be guided by a systematic assessment of the costs, benefits and unintended consequences, providing a scientific backup.
It took us a long time to convince mandarins that an ad hoc approach to cut regulatory cholesterol is inadequate. Rather, our aim should be to ensure optimal regulation.
Examples show that well-intentioned regulations have fallen short when they were not adequately tested. The ban on online gaming platforms last year was introduced to protect consumers from illegal betting and curb money laundering.
However, it not only led users to shift to offshore and unregulated platforms, but also increased the daily user rate, making the problem even harder to address.
Different sectors, different objectives but the same lesson: Better regulatory outcomes depend not just on good intentions, but on systematic design grounded in evidence. Regulations are essential for maintaining good economic governance. They correct market failures, protect consumers, safeguard the environment and ensure financial stability.
Yet, they can also create undesirable outcomes when they are poorly designed and badly implemented. A regulation intended to solve one problem may inadvertently create several others, such as adding to compliance costs and the administrative burden, discouraging innovation, distorting markets or pushing activities into informal and unregulated spaces. All this often hurts small enterprises more.
So RIA is indispensable to create a trust-based economic governance system. It can be used for existing as well as new legislations. In simple terms, RIA is a diagnostic tool for policymaking, much like a medical diagnosis before treatment is prescribed.
Unfortunately in India, policymakers draft ambiguous regulations first, evaluate the impact and carry out corrective measures later. RIA reverses this sequence to mitigate risks. Sometimes typos (‘and’ instead of ‘or’) also creep-in, which can lead to wild outcomes. Therefore, proper legal scrubbing is also required.
According to the World Bank’s Global Regulatory Practices data, over 80 jurisdictions have institutionalized RIA as part of their governance frameworks. As immediate next steps, India should provide statutory backing for RIA and create an independent apex oversight body with state RIA commissions.
Some analysts may argue in favour of sectoral regulators doing RIAs but that is not a sound idea because of their possible biases and workload.
The economic case for RIA is quite compelling. Critics often argue that impact assessment is costly and time-consuming. However, evidence suggests the opposite. Examples from the US highlight that the cumulative cost of conducting 15 RIAs was $10 million; and for three out of 15 studies, it was found that the net benefit generated exceeded that amount.
Similarly, using a regulatory guillotine, which is a three-way step of legality, necessity and proportionality clubbed with pilots and partial RIAs, can increase time efficiency.
Bureaucratic inertia, political dispositions and vested interests, including those of intermediaries that benefit from regulatory complexity, are potential sources of resistance to RIAs. But evidence from the UK shows that over £155 million of annual regulatory costs faced by businesses were removed by addressing red tape through RIAs.
Clearly, simplifying regulations can generate substantial economic gains while improving transparency and accountability.
Countries are also experimenting with innovative approaches to improve regulatory quality. The UK and South Korea have adopted variants of the ‘One-In, Two-Out’ principle, requiring regulators to scrap two existing regulations for each new one proposed.
India’s regulatory reforms have largely focused on simplifying and digitizing compliance. Further, building a dedicated cadre of trained RIA professionals will make a substantive difference.
A robust RIA framework would strengthen the confidence of investors and citizens, improve the effectiveness of domestic and foreign investment and support innovation-led, sustainable growth. Also, it can eliminate regulatory overlaps and ambiguities and make governance more transparent and efficient.
India’s next generation of reforms must go beyond deregulation to smarter regulation. Let’s institutionalize RIAs for a more competitive economy that goes by stable and evidence-based rules.
The authors are, respectively, secretary general and senior research associate, CUTS International.
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