Page 197 - ES 2020-21_Volume-1-2 [28-01-21]

180 Economic Survey 2020-21 Volume 1

THE PROBLEM OF REGULATORY EFFECTIVENESS

6.1 It is often believed that India’s regulatory problems are due to the lack of regulatory
standards and poor compliance to process. International comparisons, however, show that India
ranks better than its peers on having regulatory standards in place and compliance to process.
The real issue seems to be effectiveness of regulations caused by undue delays, rent seeking,
complex regulations and quality of regulation.

6.2 The ‘World Rule of Law Index’ published by the World Justice Project provides cross
1
country comparison on various aspects of regulatory enforcement. The index has various
sub-categories, which capture compliance to due processes, effectiveness, timelines, etc. In
2020, India’s rank is 45 out of 128 countries in the category of ‘Due process is respected in
administrative proceedings’ (proxy for following due process). In contrast, in the category
‘Government regulations are effectively enforced’ (proxy for regulatory quality/effectiveness),
the country’s rank is 104 (Table 1). India stands at 89 rank in ‘Administrative Proceedings
th
are conducted without unreasonable delay’ (proxy for timeliness) and 107 in ‘Administrative
th
Proceedings are applied and enforced without improper influence’ (proxy for rent seeking). This
shows that, contrary to the popular belief, India is relatively good at complying with processes,
but lag in regulatory effectiveness.
6.3 In fact, India’s performance has improved significantly in following due process in
administrative proceedings, with its rank improving from 72 in 2015 (out of 102 countries)
to 45 in 2020 (out of 128 countries). In contrast, it has deteriorated over time on certain other
parameters. This makes it clear that having regulations and enforcing process is one thing,
whereas their effectiveness is another.

Table 1: India’s rank in various categories of regulatory enforcement

2015 2020
Regulatory Enforcement overall rank 69 74

Government regulations are effectively enforced 87 104
Government regulations are applied and enforced without improper influence 74 107
Administrative proceedings are conducted without unreasonable delay 75 89
Due process is respected in administrative proceedings 72 45

Number of Countries 102 128
Source: World Justice Project
6.4 The index shows that United Kingdom, United States, Singapore and Canada are placed
much better than India in case of both, following due process and regulatory effectiveness.
However, the gap between India and these counties is much wider in regulatory effectiveness
than in due processes being followed. Similarly, India is placed better than other BRICS
countries (barring South Africa) in terms of respecting due process, but, worse than them in the
effectiveness of those standards (Table 2).

1 World Justice Project was found in 2006 as an initiative of the American Bar Association and became an
independent Non-Profit organisation in 2009. The data published by World Justice Project is used by World Bank
in its World Governance Indicators.