Reform in Practice: Rahul Ahluwalia (FED) on Charter Cities and Starting from Zero

What is one area of regulation in India that should be deregulated?

So when it comes to deregulation, I think the current set of exercises that are ongoing are pretty good. They are trying to identify what are the biggest barriers and trying to find ways to reduce them. I think what is important is to look forward and see how can we go a lot more drastic.

Because I think given our legacy situation, we have so many barriers across so many different fields, that trying to clip away at them little by little is valuable and we should do it. But we need a different approach. And so here, instead of trying to identify a particular sector or area or rule, I want to chalk out a different approach.

And it's not a new approach, it's the special economic zone style of approach. Cut out a huge part of the country. Huge only in nominal terms.

Say, 300 sq km zone, which is actually, from a relative perspective, it's tiny. It's like a small city. And there, start from scratch.

Say, okay, we don't need any of the regulatory cholesterol, Manish's beautiful phrase. Let's see if we can just wash away all of it and start from zero. And the way we can even supercharge this phenomenon is to say, let's give states the power to set up a zone or two like this for every state.

And then they can decide. Let them have the power to decide the concurrent laws. Let them have the power to decide state laws, which are in any case in their power.

And these will apply only within the confines of the zone that you've determined. This has two pretty large advantages. I think one large advantage is that it cuts down the political risk of taking a radical step.

And because it's geographically limited, you don't have to deal with the standard attack vectors that political opponents bring to you. The second huge advantage is if it works, that's all you need, right? One really successful urban conglomeration can power an entire state and sometimes an entire country for smaller countries. So it's both a good idea in terms of being necessary, and it is sufficient to drive the growth that we need.