REGULATION IN INDIA

“Regulation is primarily a tool of government, making trust in our public institutions an essential ingredient for success.” — OECD.

DEFINITION

Regulation is broadly defined as the control of human or societal behaviour through rules or orders issued by an executive authority or government regulatory agency that carry the force of law. Operationally, it encompasses:

• • Economic Tools: Taxes, subsidies, and administrative controls over rates and market entry.
  • Compliance Mechanisms: Rules supported by penalties or incentives to ensure adherence.
  • Scope: It covers all public or private activities that may negatively impact societal or governmental interests.

RATIONALES FOR REGULATION

• • Prevention of Market Failure: Market failure occurs when the market cannot allocate resources efficiently to maximize social welfare.
  • Restricting Anti-Competitive Practices: Regulation is used to deter firms from engaging in price-fixing, market sharing, or abusing dominant monopoly power. Transparent and non-discriminatory rules help maintain a dynamic, competitive environment.
  • Promoting Public Interest: Governments regulate to ensure fair access, non-discrimination, and affirmative action. In India, government buys crops from farmers above market prices to ensure food security.

TYPOLOGY OF REGULATION IN INDIA

1. Economic Regulation: Aims to tackle market failures by proscribing and punishing market-distorting behaviour.

Examples: The Foreign Trade (Development and Regulation) Act, 1992 and the Electricity Act, 2003, which allows regulators to fix tariffs to prevent natural monopolies from exploiting consumers.

2. Regulation in the Public Interest: Covers areas where industries fail to uphold standards of public importance, such as health and safety.

Examples: The Bureau of Indian Standards (BIS) sets quality and safety benchmarks, which are essential in markets with low consumer awareness.

3. Environmental Regulation: Focused on protecting the environment from degradation, which is viewed as a constitutional duty in India.

Examples: The Environment (Protection) Act, 1986 regulates emissions, industrial locations, and hazardous waste.

CLASSIFICATION OF REGULATORY BODIES IN INDIA

By and large, regulators are statutory bodies. But in India, they can also be constitutional and executive. Regulators can also be broadly divided into two categories: Specialised regulators and general regulators.

Type	Source of Power	Examples
Constitutional	Derived directly from the Constitution.	Election Commission, CAG, UPSC.
Statutory	Created by an Act of Parliament.	SEBI (SEBI Act, 1992), RBI (RBI Act, 1934).
Executive	Created by a Cabinet resolution.	Atomic Energy Regulatory Board(till 2025)

Specialised regulators: The are the recent developments led by market model since 1980s. due to market model all across the world in general and in India in particular, sector specific specialised regulators have become a contemporary necessity. They are supposed to be independent and non-bureaucratic.

Examples: RBI, SEBI, IRDA, PFRDA, TRAI, CCI and other similar type bodies.

General regulators: They are largely traditional administrative and bureaucratic type bodies which regulate public affairs.

Examples: CAG, ECI, CBI, CVC, CPCB, etc.

PRINCIPLES OF GOOD REGULATION

The OECD and various administrative reforms commissions (like India’s 2nd ARC) highlight several “Better Regulation” principles:

• • Proportionality: Regulators should only intervene when necessary. The “remedy” should be proportionate to the risk—avoiding “over-regulation” that stifles innovation.
  • Accountability: Regulators must be able to justify their decisions and be subject to public and parliamentary scrutiny.
  • Consistency: Rules should be predictable. If a regulator changes the “goalposts” frequently, it creates an unstable environment for investment.
  • Transparency: The process of making rules should be open. This involves public consultations and publishing the reasoning behind new guidelines.
  • Targeting: Regulation should be focused on the problem at hand (e.g., targeting carbon emissions specifically) rather than being a “scattergun” approach that affects unrelated sectors.

CHARACTERISTICS OF REGULATORY BODIES

1. Independence: To be credible, a regulator must be independent of both the industryit regulates (to avoid “Regulatory Capture”) and the political executive (to avoid short-term populism).

Example: The RBI’s independence is crucial for maintaining inflation targets regardless of election cycles.

2. Expertise: Unlike generalist administrative departments, regulatory bodies are staffed by subject matter experts(economists, scientists, engineers). This technical depth is required to oversee complex sectors like Nuclear Energy (AERB) or Telecom (TRAI).

3. Quasi-Judicial Powers: Most regulatory bodies have the power to adjudicate and penalize, that is, they have a power of civil court.

Example: SEBI can ban individuals from the stock market for insider trading.

4. Rule-Making Authority (Quasi-Legislative): They have the power to issue “subordinate legislation”—specific guidelines, circulars, and notifications that have the force of law without needing a new Act from Parliament for every minor change.

5. Financial and Administrative Autonomy: Effective bodies usually have their own sources of revenue (fees, levies) so they don’t have to wait for government “doles,” which could be used as leverage to influence their decisions.

“A regulator must be like a fence—strong enough to protect the garden but transparent enough to see through.”

Evolution of Regulation in India

Phase	Regulatory Philosophy	Key Characteristics & Major Steps	Outcome
I. Command & Control (1950s–1980s)	Socialist Mixed Economy with state control	• Direct Oversight by government • Restrictive Environment(MRTP ACT 1969) • State Monopolies	License and inspector raj with Hindu Growth Rate
II. Deregulation & Decontrol(1980s–2010s)	Market-Led Regulation and Facilitation: State to be facilitator, not actor	• 1991 Paradigm Shift: The NEP 1991 • LPG: FDI in most sectors • FEMA: FERA replaced by FEMA • Independent Regulators: TRAI and CERC/SERCs.	India becomes an emerging economy with over 7% growth rate
III. Consolidation: Light but Tight(2010s Onwards)	Light but tight approach with whole of the government led by NITI Aayog as policy think tank	• Light-Touch for Markets: Legal and regulatory reforms-IBC, GST, Labour Codes • Tight Quality Standards: The Consumer protection act 2019, Social Media Intermediary Guidelines 2021, Data Protection Act 2023 • Institutional Coherence(Whole of the Government approach ): Merging three regulators(UGC, AICTE & NCTE) to create unified regulator for university and technical education in India the Viksit Bharat Shiksha Adhishthan Bill in December 2025.	India’s rank on the Global Innovation Index 2025 was 38 from 66th in 2019

In recent years, the Indian regulatory landscape has shifted from a “Command and Control” mindset to a “Facilitative and Trust-based” model.

MAJOR ACHIEVEMENTS OF REGULATORY BODIES

A. Financial Stability and Innovation

• • RBI’s Regulatory Sandbox: Allows fintech companies to test new products (like cross-border payments) in a live environment under supervision.
  • Insolvency and Bankruptcy Code (IBC): The IBBI (Insolvency and Bankruptcy Board of India) has significantly reduced the time to resolve bad loans, shifting the balance of power from “debtor” to “creditor.”

B. Digital Transformation

• • TRAI & Telecom Reforms: India now has some of the lowest data tariffs globally. TRAI’s focus on Net Neutrality and consumer data protection has set a benchmark for developing nations.
  • Unified Payments Interface (UPI): While managed by NPCI, the regulatory oversight by RBI has allowed India to lead the world in real-time digital payments.

C. Ease of Doing Business

• • Reduction in Compliance Burden: More than 40,000 compliances have been reduced, and over 3,400 legal provisions have been decriminalized in the last decade.
  • Facilitative Taxation: The GST Council is a prime example of “Cooperative Federalism” in regulation, where Center and States decide on tax rates collectively.

D. Empirical Achievements in Regulatory Efficiency

According to the Economic Survey 2025-26, reduction in the “Compliance Burden”

• • Over 47,000 compliances have been reduced over the last five years.
  • Breakdown of Reforms:
    • 16,100+ simplified procedures.
    • 22,200+ digitized processes (faceless assessment).
    • 4,600+ provisions decriminalized (via Jan Vishwas Acts of 2023 and 2025).

• • Port Efficiency: Median turnaround time at major ports reduced from 28 days (historic) to just 0.9 days in 2024, showcasing the impact of the “National Logistics Policy” and customs regulation.
  • Aviation: Regulatory facilitating has made India the 3rd largest domestic aviation market, with airports increasing from 74 (2014) to 164 in 2025.

GLOBAL RANKINGS & PERFORMANCE

India’s regulatory reforms have directly translated into improved global standing.

• • Global Innovation Index (GII): India has seen a meteoric rise, climbing from 81st (2015) to 38th (2025) and maintaining a strong trajectory into 2025-26.
    • Fact: India ranks 1st globally in the “ICT Services Exports” indicator within the GII.
  • Ease of Doing Business (EDB) & B-READY:
    • The World Bank replaced the EDB index with the Business Ready (B-READY) index. India is part of the 2026 B-READY cohort, with assessments currently underway.
    • Historic Data: Before discontinuation, India jumped 79 positions (from 142nd in 2014 to 63rd in 2019), the highest leap for any large economy.
  • Logistics Performance Index (LPI): India has maintained 38th since 2023 from 54th in 2014, driven by “Gati Shakti” regulatory integration.

Sector	Body	Achievement
Pharma	CDSCO	India is 11th globally in pharma exports by value; 50% of exports go to "highly regulated" US/EU markets, proving regulatory quality.
Telecom	TRAI	India has the world’s lowest data costs and a 5G rollout rate that was among the fastest in the world (over 4.5 lakh 5G BTS installed by 2025).
Energy	CERC	India reached 4th position globally in total installed renewable energy capacity.

Assessment of Major Indian Regulators

Regulatory Body	Key Achievement (Empirical Data)	Structural Failure / Challenge
RBI(Banking)	Financial Stability: GNPA ratio fell to 2.2%(2025). Managed 15bn+ monthly UPI transactions.	Supervisory Lag: Delayed detection in NBFC crises (IL&FS) and urban cooperative bank frauds.
SEBI(Markets)	Inclusion: Demat accounts surged from 3.6cr (2019) to 21cr+ (2026). Pioneer in T+0 settlement globally.	Conviction Rates: Low success rate in prosecuting high-profile insider trading cases compared to global peers.
TRAI(Telecom)	Speed & Cost: Fastest 5G rollout (4.5L+ BTS); maintained lowest data tariffs globally ($0.17/GB).	Market Concentration: Sector turned into a virtual duopoly, threatening long-term competitive pricing.
CCI(Competition)	Big Tech Discipline: Imposed ₹2,000cr+ fines on Google; successfully dismantled cement cartels.	Adjudicatory Delays: Orders are often stayed by the NCLAT/High Courts for years, weakening the deterrent.
IBBI(Insolvency)	Creditor Rights: Recovered ₹3.5L crore; shifted focus from "Debtor-in-possession" to "Creditor-in-control."	Value Erosion: Excessive "haircuts" (up to 95%) in some cases and NCLT backlogs (600+ days resolution).
IRDAI(Insurance)	Digitalization: Launched Bima Sugam (one-stop platform). Insurance FDI increased to 74%.	Stagnant Penetration: Insurance-to-GDP ratio remains at 4%, far below the 7% global average.
FSSAI(Food)	Standardization: Harmonized 80% of Indian food standards with Codex Alimentarius (Global).	Enforcement: Weak state-level infrastructure leads to inconsistent food safety testing in rural areas.

MAJOR WEAKNESSES AND CRITICISMS OF REGULATORS IN INDIA

1. Lack of Independence

While many regulators are “statutory” and “autonomous,” they often function as extensions of their parent ministries.

• • Bureaucratic Overload: A 2024 analysis highlights that Indian regulatory bodies are frequently “captured” by the IAS. Top positions are often seen as post-retirement perks for civil servants rather than technical experts.
  • Financial Dependence: Most regulators (except SEBI) depend on the government for budgetary allocations. For example, the Telecom Regulatory Authority of India (TRAI) relies on the Department of Telecommunications (DoT) for its budget, limiting its ability to challenge the ministry’s policy stances.
  • Case Example: The Reserve Bank of India (RBI) faced a public independence crisis in 2018 when the government invoked Section 7 of the RBI Act (which allows the government to give directions to the RBI), leading to the resignation of Governor Urjit Patel.

2. Problem of Coordination

The proliferation of sector-specific regulators has led to “jurisdictional turf wars” where mandates overlap or fall into gaps.

• • Financial Turf Wars: In 2010, a major conflict erupted between SEBI and IRDAI over who should regulate ULIPs (Unit Linked Insurance Plans). Both claimed jurisdiction, requiring the government to issue an ordinance to resolve the dispute.
  • Data and Privacy: There is ongoing tension between TRAI and the Competition Commission of India (CCI)regarding predatory pricing and data dominance in the telecom sector (e.g., the entry of Reliance Jio).
  • The “Gap” Problem: The NBFC crisis (2018) involving IL&FS exposed a lack of coordination between the RBI and the Ministry of Corporate Affairs (MCA), as the complex web of over 300 subsidiaries allowed the entity to bypass strict oversight.

3. Regulatory Capture

Regulatory capture occurs when an agency, created to act in the public interest, instead advances the commercial or political concerns of the industry it is supposed to regulate.

• • Pliable Leadership: Critics point to State Electricity Regulatory Commissions (SERCs). Empirical data suggests they often refuse to hike power tariffs despite rising costs, succumbing to state government pressure to provide “populist” free power, which ultimately bankrupts DISCOMs.
  • Case Example: The Adani-Hindenburg episode led to public criticism of SEBI. Critics and petitioners in the Supreme Court argued that the regulator’s investigation timelines and perceived opacity suggested a degree of capture or “lethargy” in addressing allegations against a major corporate player.

4. Regulatory Cholesterol

This term, popularized by India’s Economic Survey 2016-17, refers to the “clogging” of the economy by complex, redundant, and excessive regulations that hinder business.

• • Labour Laws: The Survey highlighted that stringent labour regulations (like the Industrial Disputes Act, 1947) acted as “cholesterol” in the Textile Industry. Firms stayed small (under 100 employees) to avoid the “Inspector Raj,” preventing the industry from achieving the scale seen in Bangladesh or Vietnam.
  • Compliance Burden: According to TeamLease reports, a small-to-medium enterprise in India can face over 60,000 potential compliances and thousands of annual filings, which creates a massive barrier to the “Ease of Doing Business.”

5. Lack of Accountability

While regulators have immense power to fine or shut down businesses, there is no “Regulator of Regulators” to ensure they are performing.

• • Absence of Audits: Unlike the UK or US, India lacks a formal mechanism for Parliamentary oversight or independent performance audits of regulators. Most regulators only submit an annual report to Parliament, which is rarely debated.
  • Aviation Failures: The Directorate General of Civil Aviation (DGCA) has been criticized for “failing upward.” During the 2024/25 IndiGo crisis and Go First’s bankruptcy, the DGCA was seen as reactive rather than proactive, yet faced no institutional consequences for the systemic oversight failure.

Category	Primary Symptom	Empirical Example
Independence	Bureaucratic appointments	High percentage of retired IAS heads in SERCs/TRAI.
Coordination	Overlapping jurisdictions	The SEBI vs. IRDAI conflict over ULIPs.
Capture	Populist/Pro-industry bias	Stagnant electricity tariffs due to state political pressure.
Cholesterol	Excessive compliance	1,500+ labour law filings for large manufacturing units.
Accountability	Lack of performance review	Absence of a formal "Regulatory Impact Assessment" (RIA).

 MAJOR REFORM COMMITTEES IN INDIA AND THEIR OBSERVATIONS

Second Administrative Reforms Commission (ARC-II)

The ARC-II focused on the broader administrative and ethical framework of regulation, emphasizing that regulators often lack a clear “public interest” mandate.

• • Absence of Uniform Standards: The Commission noted that there is no uniform “Regulatory Law” in India. Each regulator operates under a different statutory framework, leading to inconsistency in powers, appointments, and accountability.
  • Excessive Discretion: It highlighted that laws often grant regulators wide discretionary powers without adequate checks, which “breeds corruption” and leads to arbitrary decision-making.
  • Need for Independence: The ARC-II found that the selection process for regulators is heavily dominated by the executive (government), often leading to the appointment of retired civil servants rather than technical experts.
  • Recommendation: It suggested a statutory framework for all regulators that clearly defines their relationship with the government and mandates periodic “Social Audits.”

Financial Sector Legislative Reforms Commission (FSLRC)

Headed by Justice B.N. Srikrishna (2013), this commission provided a scathing critique of the “fragmented” and “outdated” financial regulatory architecture.

• • Legislative “Patchwork”: The FSLRC observed that Indian financial laws are a “thicket” of over 60 different Acts, many of which are 50–100 years old (like the RBI Act of 1934) and unsuitable for a modern digital economy.
  • The Problem of “Micro-management”: It found that regulators often overstep their bounds by micro-managing business operations through “circulars” and “notifications” that carry the weight of law but lack legislative scrutiny.
  • Conflict of Interest: It pointed out that the RBI was performing too many roles—managing inflation, regulating banks, and managing government debt—which created inherent conflicts of interest.
  • Recommendation: It proposed the Indian Financial Code (IFC) to replace existing laws with a “Principle-based” approach and suggested a unified regulator for non-banking sectors.

Damodaran Committee (2013)

Tasked with “Reforming the Regulatory Environment for Doing Business,” this committee focused on the “Regulatory Cholesterol” that stifles entrepreneurship.

• • Stock and Flow of Regulation: The committee identified two problems: the “Stock” (outdated laws that should be repealed) and the “Flow” (the constant stream of new, complex regulations being introduced daily).
  • Professionalization Gap: It noted that regulatory agencies often lack the technical capacity and “capacity building” required to understand complex modern markets, relying instead on traditional bureaucratic methods.
  • Enforcement Delays: The committee found that the fear of the “3 Cs” (CBI, CVC, and CAG) makes regulators risk-averse, leading to “regulatory paralysis” where decisions are delayed indefinitely to avoid future scrutiny.
  • Information Asymmetry: It criticized the lack of transparency in how regulations are drafted, noting that stakeholders are often not consulted until after a rule is already implemented.

Committee	Primary Concern	Proposed Solution
ARC-II	Ethics and lack of accountability	A common Regulatory Law and Social Audits.
FSLRC	Fragmented laws and role conflict	The Indian Financial Code (IFC) and Unified Regulators.
Damodaran	Ease of doing business and "cholesterol"	Sunset clauses for regulations and pre-consultation.

ENVIRONMENTAL REGULATION IN INDIA

Environmental regulation in India has entered a transformative “digital and certificate-led” era in 2026. The framework has shifted from static, document-based licensing to a system centered on real-time tracking, digital traceability, and quantifiable targets.

1. Digital Compliance & Traceability

The hallmark of 2026 regulations is the mandatory use of centralized digital portals to track compliance “from cradle to grave”.

• • Mandatory Registration: All bulk waste generators, local bodies, and landfill sites must register on centralized portals; engagement with unregistered entities is strictly prohibited.
  • Real-Time Monitoring: Large “red” and “orange” category industries are now required to install real-time emission monitoring systems, with data made accessible to the public or the Environment Information System (ENVIS).
  • Technological Evidence: For the first time, data from drones, Artificial Intelligence (AI), and the Internet of Things (IoT) are recognized as legal evidence for reporting environmental pollution.

2. Extended Producer Responsibility (EPR)

EPR has evolved from a simple declaration into a rigorous, quantity-driven financial and operational planning requirement.

• • Target-Based Compliance: Companies must calculate the exact volume of products placed in the market, meet recovery targets, and purchase valid recycling certificates to avoid penalties.
  • Expanded Sectors: EPR now covers a wide range of industries beyond plastics, including End-of-Life Vehicles (ELV) and updated mandates for Battery Waste Management with enhanced metal recovery targets (e.g., lithium, nickel, cobalt).
  • QR-Based Packaging: Plastic packaging control now utilizes QR codes and barcodes to verify traceability.

3. Solid Waste Management (SWM) Rules, 2026

Effective April 1, 2026, these rules replace the 2016 framework with a focus on source segregation and landfill minimization.

• • Four-Stream Segregation: Waste must be separated at the source into four distinct streams: Wet (organics), Dry (recyclables), Sanitary, and Domestic Hazardous.
  • On-Site Processing: Bulk waste generators (e.g., airports, universities, hospitals) must process their waste on-site.
  • Polluter Pays: Mixed waste sent to landfills now attracts significantly higher fees, and failure to segregate results in direct financial penalties.

4. Environmental Impact Assessment (EIA) Revamp

Draft notifications in March 2026 proposed significant administrative shifts to speed up clearances.

• • Institutional Continuity: The creation of the Standing Authority on EIA (SAEIA) ensures that project clearances can continue even if state-level expert bodies lapse, addressing historical administrative delays.
  • Baseline Data Ease: To save resources, agencies can now use the Baseline Environment Data Information System on the Parivesh portal rather than conducting fresh seasonal data collection for every project.

5. Market-Based Mechanisms: Green Credits

The Green Credit Programme (GCP) has moved into an early implementation stage.

• • Forest Eco-Restoration: The current focus is specifically on tree plantation and eco-restoration of degraded forest lands managed by state departments.
  • Accrual Rules: Applicants can only claim credits after five years of restoration work, provided the land reaches at least 40% canopy density.

Date	Key Event / Regulation
Aug 2025	Notification of Environment Audit Rules, 2025, introducing authorized third-party auditors.
Jan 2026	Notification of the new Solid Waste Management Rules, 2026.
March 2026	Introduction of the Environment (Protection) Amendment Bill, 2025 in Lok Sabha.
April 1, 2026	Full enforcement of the 2026 SWM Rules and mandatory digital reporting portals.

REGULATION IN DIGITAL ERA GOVERNANCE

India has transitioned from a reactive to a proactive “techno-legal” regulatory framework for ICT, data protection, and AI.

1. Data Protection: DPDP Act & 2025 Rules

The Digital Personal Data Protection (DPDP) Act, 2023 is now in force, with the DPDP Rules 2025 (notified November 13, 2025) operationalizing the bulk of its provisions.

• • Data Protection Board (DPBI):A fully operational, independent board is now live to handle personal data breach reporting and user grievances.
  • The “Consent Manager” Ecosystem:Effective November 13, 2026, citizens will use interoperable platforms (Consent Managers) to centrally manage, review, and withdraw consent for data processing.
  • Strict Penalties:Non-compliance, such as failure to take reasonable security safeguards to prevent a breach, carries penalties up to ₹250 crore.
  • Rights of Data Principals:Users have the right to access, correct, and erase their personal data, with platforms required to delete data within 90 days of an account deletion request.

2. Social Media: IT Amendment Rules 2026

The IT (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2026, effective February 20, 2026, significantly tightened the accountability of social media intermediaries.

• • Rapid Takedown Timelines:* 3 Hours: Platforms must remove unlawful content within three hours of a government or court order (reduced from 36 hours).
    • 2 Hours:Highly sensitive content, such as non-consensual deepfake nudity or intimate imagery, must be removed within two hours.
  • SSMI Obligations:Platforms with over 5 million users (Significant Social Media Intermediaries) must now require users to declare if content is AI-generated and deploy automated verification tools.
  • Grievance Appellate Committee (GAC):This body can overturn platform moderation decisions, with resolutions required within seven days starting in 2026.
  • Conditional Safe Harbour:Platforms lose their immunity (Section 79 protection) from legal liability if they fail to label AI content or miss the 3-hour takedown window.

3. Artificial Intelligence: “Techno-Legal” Oversight

India regulates AI through a decentralized approach involving MeitY advisories and the India AI Governance Guidelines (2025).

• • Synthetically Generated Information (SGI):Indian law now defines SGI as any media algorithmically created or altered to appear real.
  • Mandatory AI Labelling:AI-generated content must have visible watermarks and audible disclosures for audio files.
  • Traceability & Metadata:Platforms must embed permanent, traceable metadata (digital fingerprints) into AI-generated files to track their origin to the specific AI tool used.
  • The Seven Sutras:The 2025 framework is built on seven principles (sutras), prioritizing “Trust,” “People First” (requiring human-in-the-loop for high-risk decisions), and “Innovation over Restraint”.
  • Regulatory Sandboxes:The government encourages high-risk AI deployments (e.g., in fintech or healthcare) to be tested in “sandboxes” overseen by sector regulators like the RBI or SEBI before full public release.

Milestone	Deadline	Requirement
IT Rules Compliance	Feb 20, 2026	Implementation of 3-hour takedown and AI-labelling.
Consent Managers	Nov 13, 2026	Organizations must integrate with registered Consent Managers.
Full DPDP Enforcement	May 13, 2027	Every substantive provision of the DPDP Act becomes legally binding.

SDB 2.0

The Economic Survey 2024-25 highlighted SDB 2.0 (Systemic Deregulation for Business 2.0) as a core pillar of India’s medium-term growth strategy.

While closely linked to the broader Ease of Doing Business (EoDB) 2.0 initiative, SDB 2.0 specifically focuses on moving away from a “command and control” mindset toward systematic deregulation to enhance economic freedom for individuals and small businesses.

Core Objectives of SDB 2.0

The survey outlines the following priority areas for this “second generation” of deregulation:

• • Empowering the Mittelstand:The primary focus of SDB 2.0 is to create a viable Mittelstand (SME sector) by reducing the regulatory and compliance burden that disproportionately affects small and medium enterprises.
  • Risk-Based Regulation:Instead of uniform, rigid mandates, SDB 2.0 advocates for regulation based on actual risk profiles—for instance, moving away from indiscriminate mandates for less-polluting industries.
  • State-Led Liberalization:A significant portion of the SDB 2.0 agenda rests with state governments, who are urged to:
    • Liberalize outdated standards and controls.
    • Set firm legal safeguards for contract enforcement.
    • Reduce arbitrary tariffs, fees, and “regulatory cholesterol”.

Strategic Shifts under SDB 2.0

The survey identifies SDB 2.0 as an “unprecedented challenge and opportunity” to reinvigorate domestic growth levers in a fragmented global economy.

Feature	SDB 1.0 (Legacy Approach)	SDB 2.0 (New Framework)
Governance	Trust-deficit; heavy on inspections.	Trust-based governance; light-touch reforms.
Compliance	Indiscriminate Quality Control Orders.	Rationalized QCOs; risk-based compliance.
Registration	Document-intensive processes.	Seamless entries (e.g., 15-minute registrations).
Philosophy	Administrative control.	Economic freedom for individuals/firms.

Implementation Pathways

To achieve the goals of SDB 2.0, the government has initiated several structural steps:

• • Regulatory Detox:Scrapping outdated legislative provisions and “indiscriminate” Quality Control Orders that adversely affect downstream industries.
  • Investment Friendliness Index:A new index to assess and rank states based on their investor-friendliness, fostering “competitive cooperative federalism”.
  • Digital Integration:Expanding portals like MCA21 Version 3, Udyam, and the National Single Window System (NSWS) to unify central and state-level approvals.

RECENT DEVELOPMENTS

• • Outcome-Based Governance: As seen in the Union Budget 2025-26, the focus has shifted from “adding rules” to “measurable outcomes” and simplifying compliance.
  • Unified Codes: The implementation of the Four Labour Codes (2025) consolidated 29 laws, simplifying the regulatory burden on MSMEs.
  • Digital Integration: Integration of regulators with platforms like DigiLocker and the use of AI for “SupTech” (Supervisory Technology) to monitor fraud in real-time.
  • National Single Window System (NSWS): A digital “one-stop-shop” for investors to identify and apply for all necessary approvals (Central and State) without visiting multiple offices.
  • Jan Vishwas (Amendment of Provisions) Act (2023 & 2025): It decriminalized over 180 provisions across 42 Central Acts (like the Environment Protection Act and IT Act).
  • Regulatory Impact Assessment (RIA): Though still in its early stages in India, several regulators (like SEBI and IBBI) have started conducting public consultations and cost-benefit analyses before introducing new regulations.
  • Mission Karmayogi: Focuses on Capacity Building for civil servants and regulators to ensure they have the technical expertise required for modern sectors like AI, Space, and Green Energy.

Why This Matters

• • Trust-Based Governance: The shift from criminal to civil penalties (Jan Vishwas Act) indicates a move toward trusting the citizen/corporation rather than assuming “guilt by default.”
  • Economic Diplomacy: Sovereign credit rating upgrades in 2025 (by S&P and R&I) are a direct result of “Regulatory Stability” and “Prudent Fiscal Management.”
  • Minimum Government, Maximum Governance: The use of “SupTech” (Supervisory Tech) allows regulators to monitor billions of UPI transactions (over 15 billion/month in 2025) without human interference, reducing corruption.

Way Forward

• • Financial Autonomy: Funding should ideally come from the Consolidated Fund of India or industry fees to reduce dependence on ministries.

“As the economy opened up, independent regulatory bodies became necessary to ensure fairness between public and private companies. Public interest is best served by insulating decision-making from political interference”–ARC-II.

• • Parliamentary Oversight: Strengthening the role of Standing Committees to review the annual reports of these bodies. “Strengthen parliamentary oversight of regulators through Departmentally Related Standing Committees to ensure accountability and transparency”–ARC-II.
  • Regulatory Impact Assessment (RIA): Before a new rule is passed, its potential economic impact should be evaluated, as practiced in OECD countries. The Damodaran Committee (2013), is frequently cited for its recommendation to institutionalize Regulatory Impact Assessment (RIA) to improve governance and ease of doing business in India.

Conclusion

Positive steps like the Jan Vishwas Act and Single Window systems show that India is moving toward a “Minimum Government, Maximum Governance” framework. However, the next leap in regulation must focus on Financial Autonomy for regulators and institutionalizing Regulatory Impact Assessments across all ministries.

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