Beyond Deregulation Absolutism: Why India Needs High-Quality Regulation For Sustainable Growth

Every few weeks, a familiar argument resurfaces in Indian policy discourse: that regulation — not capital, labour, or technology — is the binding constraint on India's economic growth. This argument was again articulated today as an opinion article — complete with English and Roman allegorical references — by an "assistant consultant" at the EAC-PM, in the Economic Times. 

The claim is seductive. It simplifies complexity, identifies a villain, and promises acceleration through subtraction. But when applied indiscriminately, this framing is analytically narrow and institutionally risky.

India’s regulatory ecosystem is too vast, too heterogeneous, and too sector-specific to be reduced to a single friction variable. Treating “regulation” as a monolithic growth suppressant is not reformist clarity — it is reductionism.

The way forward, I argue, is not deregulation absolutism. It is regulatory maturity.

Regulation Is Not a Single Object

“Regulation” in India spans profoundly different domains:

Financial market supervision

Competition law

Food safety and standards

Pharmaceutical approval

Aviation safety

Telecom pricing and quality

Environmental clearance

Insolvency resolution

Energy tariff-setting

To speak of “regulators” as though they perform identical functions across sectors is to collapse critical distinctions.

Consider the main economy regulators:

Reserve Bank of India (RBI) safeguards monetary and financial stability.

Securities and Exchange Board of India (SEBI) ensures capital market transparency.

Competition Commission of India (CCI) addresses anti-competitive conduct.

Insolvency and Bankruptcy Board of India (IBBI) governs structured exit and resolution.

Now compare them with:

Food Safety and Standards Authority of India (FSSAI)

Central Drugs Standard Control Organisation (CDSCO)

Directorate-General of Civil Aviation (DGCA)

Commissionerate of Railway Safety (CRS)

These institutions are not designed to maximise churn. They are designed to prevent systemic harm.

Conflating economy regulators with transport regulators, for example, under a single “regulatory burden” thesis is not bold reformism — it is a category error.

The Narrow 'Churn' Narrative

There is an emerging argument — emanating particularly from certain elements in the EAC-PM — that equates economic dynamism with corporate churn: High entry and exit, rapid firm turnover; displacement of 'incumbents'; etc are presented as the hallmarks of economic vitality. 

This churn obsession is narrow, reductive, and potentially dangerous. It borrows heavily from venture-capital logic in consumer tech markets — where modular capital, low failure costs, and quick pivots are normal.

But India’s industrial growth structure is not confined to app-based services. In capital-intensive sectors — infrastructure, heavy manufacturing, pharmaceuticals, aviation, energy — excessive churn signals instability, not vitality. Long gestation cycles, safety compliance, and asset specificity demand institutional continuity.

When policy discourse begins to valorise churn for its own sake, regulatory focus risks shifting from:

Ensuring quality

Maintaining safety

Guaranteeing transparency

Protecting consumers and investors

to:

Accelerating entry

Reducing friction indiscriminately

Celebrating turnover

A regulator is not a market animator. It is a trust guarantor. Churn without trust produces fragility.

What Regulation Is Actually For

Across sectors, the core purpose of regulation remains consistent:

Ensuring safety

Guaranteeing product and service quality

Maintaining transparency

Protecting consumers and investors

Preventing systemic risk

Preserving public trust

Markets without trust do not scale.

Financial systems without prudential oversight implode.

Export sectors without credible certification lose global access.

Regulation, therefore, is governance infrastructure. The problem is not regulation per se. The problem is regulatory design inefficiency, procedural opacity, and uneven state capacity. This distinction matters.

Regulation Reform Without Romanticism

Yes, regulators must be reformed. But reform should focus on institutional strengthening, not institutional thinning.

1. Capacity Enhancement

Regulatory authorities must be adequately staffed — quantitatively and qualitatively — to match the technical complexity of the sectors they oversee.

2. Interoperable Compliance

Fragmented compliance architectures disproportionately burden MSMEs. Digitised, API-based, interoperable systems can reduce friction without lowering standards.

3. Risk-Tiered Supervision

Smaller firms should face proportionate compliance burdens, escalating with scale and systemic impact.

4. Outcome-Based Regulation

Focus more on measurable public-interest outcomes, and less on paperwork correctness, especially in case of economy regulators. 

5. Structured Parliamentary Oversight

This is crucial. Every regulator should be subject to structured parliamentary questioning. The Parliament must be empowered to demand:

Transparent enforcement data

Internal decision-making disclosures

Performance benchmarks

Staffing adequacy reports

Timeline accountability

Because regulatory legitimacy depends not only on technical competence, but on democratic accountability.

A real and strong regulator, therefore, is not one insulated from scrutiny. It is one strengthened by structured scrutiny.

The "Binding Constraint" Fallacy

Declaring regulation as the binding constraint in a heterogeneous economy like India, is intellectually tempting but strategically hazardous.

India faces multiple interacting constraints:

Skill mismatches

Judicial delays

Infrastructure gaps

Demand volatility

State-level administrative variation

Regulation intersects with these — it does not singularly define them. Single-variable explanations are rhetorically powerful but analytically weak. Policy discourse must resist the temptation to trade complexity for clarity.

MSMEs, Startups, and Regulators as Co-Enablers

I propose a forward-looking growth framework that does not position regulators as adversaries. It aligns three actors:

Regulators

Provide trust signals, predictable enforcement, and transparent rules.

MSMEs

Leverage compliance as credibility capital in supply chains and export markets.

Startups

Innovate within sandboxed, graduated compliance pathways.

Regulation, when designed intelligently, can become a market-enabling layer — not a choke point.

The Way Forward

India does not need regulation romanticism or deregulation hyperbole.

It needs:

High-capacity regulators

Transparent rulemaking

Risk-based supervision

Digital compliance rails

Sector-specific institutional intelligence

Parliamentary oversight

Strong economies are not those with weak regulation. They are those with high-quality regulation.

The debate should not between regulation and growth. It should be between shallow churn narratives and serious institutional reform. And only the latter can ensure mass-scale trust, quality, and sustainable growth in India.