By Pradeep S Mehta & Tasmita Sengupta
At a recent global business summit in New Delhi, Prime Minister Narendra Modi spoke of turning the traditional regulatory dictum of ‘prohibited unless permitted’ on its head and replacing it with ‘permitted unless prohibited’. If implemented properly, this approach could translate the principles of ease of doing business and ease of living into regulations that are necessary, proportionate, predictable and innovation-friendly.
India’s recent free trade agreements (FTAs) reflect this shift in governance. Its expanding economic partnerships with the UK, European Union, Oman, New Zealand and other major economies position the country as a bridge-builder at a time of geopolitical fragmentation and supply-chain realignment. But modern FTAs go well beyond tariff reductions. They increasingly address regulatory mismatches, which can obstruct trade and disproportionately impact MSMEs, even after customs duties are lowered.
Good Regulatory Practices (GRP), have therefore become an important part of trade negotiations. Previous agreements contained individual elements of GRP, such as publication of measures, enquiry points, technical cooperation, risk-based customs inspections and review mechanisms. The India-Malaysia CECA, for instance, provided for customs risk management to differentiate low-risk consignments while focusing enforcement on high-risk goods.
Other agreements have gone beyond this. Chapter 24 of the India–UK Comprehensive Economic and Trade Agreement is India’s first standalone GRP chapter with an express provision on Regulatory Impact Assessment (RIA). It recognises the utility of RIA while preparing major regulatory measures and identifies assessment of regulatory need, feasible alternatives and the impact on small businesses as relevant considerations.
Compared to this, the India–EU FTA’s GRP chapter has wider application. It calls for examining whether regulatory intervention is necessary and assessing the prospective economic, social and environmental impacts.
These provisions matter because regulatory quality is now directly connected with trade credibility. If India wants to attract long-term investment, participate in global value chains and become a technology-driven and manufacturing hub, its regulatory system must be able to respond to innovation without creating uncertainty. Poorly designed rules can raise entry barriers, protect incumbents and discourage innovation. Equally, regulatory delay or absence can weaken consumer/investor trust and allow emerging risks to grow.
RIA offers a disciplined middle path. It assesses the consistency of proposed regulations with their implications on samaj, sarkar and bazaar. The Department for Promotion of Industry and Internal Trade has laid an important foundation through its RIA Guidebook for central ministries and departments. The next step should be to move towards effective institutionalisation, for which India needs an enactment of a standalone enabling law for RIA that would provide it with a statutory anchor to bind the Union ministries and state governments within the framework for creating RIA Commissions.
International experience offers useful lessons. In the UK, departmental Better Regulation Units support policy teams, while the independent Regulatory Policy Committee scrutinises the analytical quality of significant proposals. The European Commission’s Regulatory Scrutiny Board examines major impact assessments and evaluations following an “evaluate first” principle, before substantially amending a policy.
South Korea has placed RIA on a statutory footing through its Framework Act on Administrative Regulations. Ministries prepare assessments, while the Regulatory Reform Committee, operating directly under the President, scrutinises important proposals. It further connects RIA with regulatory registries, sunset clauses, MSME safeguards and emerging-technology road maps.
Legislation alone, however, will not guarantee meaningful assessment. Ministries may perceive RIA as another approval layer or a box-ticking exercise, particularly if it is introduced without consultation or adequate analytical capacity. Political and administrative buy-in must therefore precede full-scale enforcement and enable dedicated budgetary allocations. Citizens, officials and business executives must be sensitised to how RIA can prevent implementation failures, litigation and repeated amendments.
India should begin with pilots supported by a dedicated RIA Unit within DPIIT, working in coordination with NITI Aayog. The Unit could provide technical assistance, review major assessments, monitor implementation and publish consultation papers and an annual Better Regulation Report. Periodic independent evaluation should determine whether RIA is influencing regulatory choices or merely generating additional paperwork.
Furthermore, India should adopt a proportionate, risk-based approach to RIA in which minor or routine changes undergo a preliminary screening, while detailed cost-benefit analysis is reserved for measures with significant economic, social, environmental, competition or innovation effects.
Additionally, capacity-building should focus on developing a pool of trained RIA practitioners through structured courses and partnerships with training institutions with suitable professional accreditation. External experts can be approached to strengthen analytical capabilities.
Technology can further strengthen this institutional architecture. AI-enabled tools can help authorities identify regulatory changes, map affected sectors, markets and documentation, assess the extent of required modifications, and develop implementation and compliance plans. It can also mitigate risks associated with manual assessments, including delayed regulatory intelligence, siloed information, inconsistent impact mapping and reactive decision-making. However, such systems must remain transparent, auditable and subject to human oversight, with safeguards for optimality, data quality, bias, confidentiality and accountability.
A statutory, adequately funded and technology-enabled RIA system can ensure that domestic regulation allows Indian citizens, enterprises and foreign investors to benefit from the reforms. This would transform regulatory reform from a periodic campaign into an enduring pillar of Viksit Bharat.
(The authors are secretary general & senior research associate at CUTS International) .
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