Deregulation: Relieve businesses of relics from India’s command economy

Subscribe to enjoy similar stories. A recent report by an investment bank says that the three biggest areas of focus on the economic-policy front for the Indian government right now are striking bilateral trade deals, stepping up investments in strategic industries such as semiconductors and reducing the burden of regulation on firms as well as citizens. The new Economic Survey written by officials in the finance ministry made a compelling case on how a surfeit of outdated regulations hold back the growth of firms, especially smaller enterprises that drive job creation.

It also identifies what can be done to fix the problem. Earlier this month, in a lecture delivered in Mumbai, Sanjeev Sanyal from the Prime Minister’s Economic Advisory Council spoke about the importance of process reforms that usually get less attention in India than structural reforms. The case for a fresh round of deregulation is in the air.

There are lessons to be learnt from economic history, especially about how controls introduced at a particular point in time to deal with a problem tend to stick on even after the underlying situation has completely changed. The origins of the interventionist state in India can be traced back to the first half of the 20th century, in the early days of World War II. The colonial government armed itself with sweeping powers over economic activity in the country.

The Defence of India Rules were imposed on 3 September 1939, just two days after the German army invaded Poland. The government gave itself extensive powers over the supply of essential commodities. Rule 81 of the Defence of India Rules created sweeping powers “for regulating or prohibiting the production, treatment, keeping, storage, movement, transport,