Transformative technological innovations of the twenty-first century have changed the way business is done the world over. Thousands of pages of documents and billions of dollars can move from one end of the globe to the other in nanoseconds, and a patient in Dubai can consult a specialist in New Delhi, as if both were sitting across a consulting table. However, government processes have not kept pace; your friendly tax inspector may still require you to file physical forms in triplicate.

The slow pace of government decision-making, and the effort required to comply with government regulations, is not exclusive to India; countries as disparate as the US, Argentina, Belgium, Vietnam, France and Great Britain are bigger victims of red-tape. According to the Economist: “Americans spend a total of 12 billion hours a year complying with federal rules, including those on marketing and selling honey, and following standards on the flammability of children’s pyjamas.

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The federal code runs to 180,000 pages, up from 20,000 in the 1960s. In the past five years the European Parliament has enacted more than twice as many laws as America. Businesses are required to make painstaking sustainability disclosures, filling in more than a thousand fields on an online form ~ an undertaking that is estimated to cost a typical firm in Denmark €300,000 ($310,000) every year. In Britain, wellmeaning rules protecting bats, newts and rare fungi combine to obstruct, delay and raise the cost of new infrastructure.”

Red tape is so detested by citizens that Javier Milei won the election for the Argentinian Presidency by campaigning with a chainsaw, which he promised to wield to cut Argentina’s red tape. Then, cutting red tape was one of the promises that Donald Trump made, to get elected to the US Presidency. Putting his words in action, Trump has set up the Department of Government Efficiency (DOGE), under his friend Elon Musk, which has already shut down several Government departments. Last heard, Trump had offered eight month’s severance pay to all Government employees, as an incentive to quit Government service.

In India, PM Modi has given a call for ‘“Minimum Government, Maximum Governance” and in New Zealand, citizens can report any “red-tape issue” to the “Ministry for Regulation.” However, there is a Catch22 situation, if the strength of the Government is halved, as Trump wants it, then each Government employee’s workload will be doubled, slowing down the working of the Government. However, in most cases, it is a question of costs versus benefits. For example, food safety regulations require many kinds of checks, to ensure that healthy food stuff is sold in the market. Similarly, weights and measures inspectors ensure that customers are not cheated.

But at the same time, the arcane language and outdated procedures followed in courts that inconvenience everyone can hardly be justified. According to studies, onerous regulatory requirements exact a humongous social and monetary cost. Building roads and other public infrastructure in India takes ages, because permissions have to be taken from a number of authorities. The same is true for starting a new business. Now, in many countries, mandatory qualifications have been prescribed for following mundane professions, and even hairdressers and painters cannot work without a licence.

The newest kid on the block is environmental clearance, which either does not materialise, or co m es so late that projects often lose their viability in the interregnum. With the increasing complexity of social and business interactions, the number and complexity of regulations has increased manifold. Online filing of more than eight crore income-tax returns required a new Income-tax Code, proliferation of online banking frauds required another set of regulations, and the spectre of climate change requires brand new environmental regulations. Particular groups benefit from regulations while the public at large bears the cost, for example, complex import regulations and high tariffs benefit local manufacturers but increase commodity prices. Complex regulations hit small businesses the hardest, because they are not equipped to do the necessary paperwork.

The tax regime in India is a perfect example of this phenomenon: Companies are taxed at the lowest rate, but floating a company, and maintaining it, requires expensive professional help. Similarly, GST compliances require some dedicated manpower. That said, rules are essential for society; if no standards are prescribed, we will end up eating contaminated food, roads will become racecourses, and so on. Needless to say, an army of bureaucrats is required to frame rules, and see that they are followed. No wonder, deregulation is often resisted by entrenched businesses, trade unions or environmentalists, because deregulation brin – gs small benefits to many, but imposes much larger costs on some few.

Therefore, according to an IMF study, many reforms never see the light of the day, or are implemented in a way that renders them ineffective. The stranglehold of mindless regulations on the economy is hard to miss; cutting red tape will free citizens from hours of drudgery, and quicken economic growth. But regulations have to be toned down in the correct measure so that desired changes do happen, but at the same time, a chaotic situation is avoided. The Trumpian method of doing away with essential functions of government, without providing alternatives, may result in a governance vacuum. The heading of the preface to Economic Survey 2025-26 reads: “Preface: Driving domestic growth and resilience through deregulation” and the Survey begins with the words: “Lowering the cost of business through deregulation will make a significant contribution to accelerating economic growth and employment amidst unprecedented global challenges,” which would show that deregulation is high on the Government’s priorities.

The Survey sees the Government “getting out of the way” of businesses and allowing businesses to focus on their core mission. The Survey further advises the Government to roll back regulation, stop micromanaging economic activity and embrace risk-based regulations, and most importantly, change the operating principle of regulations from ‘guilty until proven innocent’ to ‘innocent until proven guilty.’ To its credit, the Government has carried out a series of structural reforms in the last decade. Goods and Services Tax (GST), Insolvency and Bankruptcy Code (IBC), RERA (Real Estate Regulation Act), and most importantly, the digital triad of UID, UPI and DBT, have altered the way businesses are run. PAN 2.0 and the Jan Vishwas Act, which decriminalized 183 provisions of 42 Central Acts, administered by 19 Ministries/ Departments, are the latest initiatives by the Central Government for deregulation.

Still, onerous regulations at the State level continue to shackle businesses. Most of the areas where deregulation is urgently required ~ land, buildings, water, and local trade and commerce ~ are in the State List. Some other promising areas, like labour welfare, electricity, and mechanical vehicles, are in the Concurrent List. So, the ball is in now more in the States’ court, recognising which a Business Reform Action Plan (BRAP) has been formulated by the Department for Promotion of Industry and Internal Trade (DPIIT) for States, which aims at:

(i) Simplification of procedures related to applications, renewals, inspections, filing records, etc.

(ii) Rationalization of legal provisions, by repealing, amending or omission of redundant laws, (iii) Digitization of government processes by creating online interfaces, and

(iv) Decriminalization of minor, technical or procedural default. But States, most of which have seen their authority shrink in the last few years, and some which are at loggerheads with the Centre, are not on the same page. Thus, the challenge boils down to Centre-State synergy, which needs to materialise for a common good. Significantly, there is a contrary view to deregulation, which sees deregulation leading to the rise of powerful oligarchies at public cost. According to Dennis Kucinich, a prominent US politician: “Utilities used deregulation to affect a series of mergers limiting competition.

In order to accelerate profits, cost cutting ensued, involving the layoff of thousands of utility company employees, including some who were responsible for maintenance of generation, transmission, and distribution systems. A number of investor owned utilities stopped investing in the maintenance and repair of their own equipment, and, instead, cut costs to enhance the value of their stock rather than spending money to enhance the value of their service.” Therefore, in the final analysis, not deregulation per se, but finding the right regulatory structure may be the answer to our economic problems.

(The writer is a retired Principal Chief Commissioner of Income-Tax)