The Regulatory Chakravyuh

Economic Times, April 30, 2012

By Pradeep S Mehta

States must be roped in to weed out cumbersome rules that hurt business growth

If one is flying to anywhere in India, one comes across 4-5 security check points at our airports to check the flyer’s ticket and identity before one can board the aircraft: at the entrance to the building, then another one when entering the check-in area (at smaller airports ), next when entering the screening area and, finally, just the boarding card and the stamped baggage tags when clearing the security.

At each of the check points, the Central Industrial Security Force (CISF) security official takes 15-30 seconds to verify a passenger’s bona fides, subject to the queuing backlog. Resources are deployed in numbers to ensure an orderly passenger entry. And this is justified on the grounds of security.

The critical point to verify bona fides, etc, is the one at the security screening area just before proceeding to the boarding gate. In most countries, so many entry check points do not exist, and neither do the rubber-stamping of boarding cards and baggage tags (except in some developing countries).

If one multiplies the cost of all the manpower and paper, imagine the humongous cost and environmental burden. Why cannot the authorities think of a proportionate, critical and less expensive approach to ensure airport and flight security? There are two reasons for this: lack of thinking about lowering the regulatory and cost burden with a strategic focus and the measures’ proportionality.

The pernicious system is afflicted by status quoism, lack of imagination and paranoia. This is symptomatic of our regulatory maze, or chakravyuh. While the airport security process is linear and people have to catch flights, hence there is a pressure on the security to move passengers as soon as possible.

If there were no pre-defined flight timings, the passenger movement could be choked as our other regulatory systems. While discussing these issues with an argumentative official , he just threw up his hands, “Mein kya kar sakta hoon? (What can I do?) Aap upar kahiye (Inform the brass).”

Being a frequent traveller, this experience is echoed in the matter of establishing and running an enterprise. Though not linear, but multiplicity of regulations and time taken just makes life difficult for an entrepreneur, other than raising costs. Our babus’ ifs-and-buts dominate the DNA of any regulatory system, and that is akin to the paranoia in the airport security system.

Proportionality is always at a premium and policy inertia only adds insult to the injury. No wonder we are one of the worst countries in the world in terms of establishing or running an enterprise. World Bank has ranked us at 134th place in a list of 183 countries in 2011. In a February 2012 survey by workplace solutions provider Regus, nearly half of the responding business decision-makers felt that red tape was a serious threat to business growth.

Inflation was counted as the second most by slightly less numbers, while every third person felt that political instability as the third most important factor. Only about a quarter felt that global economy was a factor. This only reflects the positive side that our domestic economy is the main sustenance for growth.

Another good news is that the Planning Commission is seriously addressing these problems in an effort to raise manufacturing share of GDP to 25% by 2022 from the existing 15.5%. It is quite evident that we need to push manufacturing to create jobs for millions of unemployed and underemployed people in our country , particularly the youth. The strategy is ready and a National Manufacturing Policy too has been adopted.

This exercise will not be resulting in another glossy report to lie in some shelf or website, but the effort is to roll out the implementable recommendations so that a beginning is made in curbing excessive and choking regulation. The first step in this direction is to establish a National Business Facilitation Grid, which will be a repository of all business regulation in the country, so that cumbersome and convoluted regulations can be identified, and alternatives explored.

There are various estimates in the country about the number of regulations that an entrepreneur has to comply with to establish a business. Running it is another story. For example, getting construction permits and resolving legal disputes are other painful experiences.

In some cities, efforts are being made to ease the construction permit maze, while disposal of court cases is under the lens of a proposed National Mission for Justice Delivery and Legal Reforms that will seek disposal of cases within three years against the existing 15 years.

Alas, both exercises are a Herculean task because of inertia, corruption and vested interests. In order to weed out or rationalise useless regulations, the plan body’s strategy also speaks about undertaking scientific regulatory impact assessments. Such an exercise is par for the course in many countries, even for new regulations. It will be attempted for the first time in India.

The catch is that states will need to be involved in this exercise closely, as much of the regulatory chakravyuh exists locally. The problem will be where political patronage and vested interests will be affected. A consensus can evolve through a dialogue and the plan body will have to market it to states, like a skin fairness cream, to demonstrate to them that revenues will rise and new jobs created.

The author is secretary general, CUTS International.

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