MUMBAI: Warning that business as usual approach to policy reforms will push the economy which is already facing hiccups, to growth stagnation, the economic survey said by reducing the excessive regulatory burdens, governments can help businesses become more efficient, reduce costs, and unlock new growth opportunities. In short, the governments should help the industry rediscover their animal spirits.
“Regulations increase the cost of all operational decisions of firms, the survey said outlining a three-step process for the states to systematically review their regulations for their cost-effectiveness. These steps include identifying areas for deregulation, thoughtfully comparing the regulations with other states and countries and estimating the cost of each of these regulations on individual enterprises.
The survey also highlights that the next generation ease of doing business should be a state-led initiative focused on fixing the root causes behind the unease of doing business. And in the next phase, states must break new ground on liberalizing standards and controls, setting legal safeguards for enforcement, reducing tariffs and fees, and applying risk-based regulation.
While stating that looking ahead, economic prospects for FY26 are balanced, there are headwinds such as elevated geopolitical and trade uncertainties and possible commodity price shocks while “domestically we will have to overall improve our global competitiveness through grassroots-level structural reforms and deregulation to reinforce its medium-term growth potential.”
The survey further argues that faster economic growth is possible only if the Centre and states continue to implement reforms that allow small and medium enterprises to operate efficiently and compete cost-effectively because excessive regulatory burdens, make businesses more inefficient, operations costly, and lock their growth opportunities.
While the survey notes that the Centre has eased processes by simplifying taxation laws, rationalising labour laws, and decriminalising business laws, states have also participated in deregulation by reducing compliance burdens and simplifying and digitising processes but more needs to be done.
“By empowering small businesses, and enhancing their economic freedom, and ensuring a level playing field, governments can help create an environment where growth and innovation are not only possible but inevitable. Our growth aspirations require nothing less and a business as usual approach will not work,” the survey says.
It concludes by stating that for sustaining higher growth; “...we need to ensure increasing private participation in infrastructure by improving their capacity to conceptualise projects and their confidence in risk and revenue-sharing mechanisms, contract management, conflict resolution and project closure."