Conversations on Deregulation: M.R. Madhavan, PRS Legislative Research

What did Indian policymakers get right on deregulation?

One of the things we have managed to do well over let's say the last 50-60 years is when we change policies, for it to sustain, it takes time but we try to build consensus around it. In a way, that's the strength of a democratic system and that's the weakness of a democratic system. So, it takes time to do things because there are a lot of stakeholders who have to be convinced but the good thing about that is, by and large, once you have convinced people and you have taken the steps forward, they remain regardless of the parties in power, who comes and who goes.

So, even if you see 1991, we actually changed paths in a certain way. Since 1991, we have had practically every party holding the rings of power either directly or in coalition at every point of time and we have not moved backwards. The pace of forward movement may change, may slow down and may go forward but we have not really reversed any of the significant reforms.

So, I think that's something that as a country we have managed to do well and this goes not just at the central level because a lot of change happens at the state, a lot of things that affect people, decisions are made at the state level, lots of permissions are made at the state level. Even in those levels, not too many things get reversed. A few things get reversed definitely for the optics of it, for the politics of it but the underlying theme does not really turn back.

I mean, that's something we have managed to do well. 

What frictions still constrain India's reform agenda?

The same process, when you need to get a lot of people's buy-in, it's not easy to get done and there are lots of interests at stake here and many of them are just, maybe just sheer habit. I mean, for instance, do people in government and when I mean people in government, I do not mean just the prime minister or the cabinet or even the secretaries but all the way down to the inspector or even below.

Do they believe that it is good for the country to let go of some of the controls they have and let people do what they want to do as long as it doesn't harm others or harm the environment and you block the harms or do they actually want to control every part of every process because they have done it and they are uncomfortable letting go. So, some of these are real issues. How do we get past them? I guess a mixture of convincing and a mixture of dictatorship from the top and a mixture of building public opinion around it because even the wider public opinion, I am not very sure it's about letting go of control.

I mean, even if you see the recent Indigo story, everybody says, okay, there should be less control. They are not getting to the core of the problem, which is that it's a duopoly. There is not enough competition in the market and that's the reason the problem happened.

It's not a question of somebody's exploiting, so let's actually wield the stick. So, that sort of a thing, it's not an easy thing. So, this is a long haul and a lot of friction arises out of these considerations and we have seen that even in all the bills that we work at.

There is still a lot of detailed regulations, thou shalt not do ABC, keeps coming up and if you do any of those, it's not even a fine. Many of them, you go to jail. I mean, just for instance, just last week, there was an excise bill passed and strangely for a tax law, delayed returns, if the amount is of a certain amount, but that's not relevant, you go to jail.

Tax law having a jail term for delayed returns is definitely not a progressive step. So, we still have all those things coming up. 

Where do you see India in 25 years?

Not hopefully more. I'm reasonably convinced that a lot of factors are good for India. So, whatever people may say, democracy is a real strength because the way I look at it, democracy doesn't ensure that you do really well, but it ensures that you don't go horribly wrong. So, it's in a way reduces volatility, let me put it that way.

So, and we have many other factors taking us forward and hopefully, as they say, I mean, change happens when a generation dies and that is more and more happening. So, young country, people not steeped in the pre-reform era thinking coming up. Hopefully, I'm thinking there'll be more deregulation, more opening up, more freedoms going forward and economic growth, I think.

I mean, we should be doing maybe not as well as what China did for 30 years, but not too badly, definitely better than what we did for the first 50 years.