What India's deregulation debate misses

Weak state capacity is a constraint to development. India has neither a fully functional state nor a robust market. Both need strengthening

- AASHEERWAD DWIVEDI ADITYA SINHA

"DEREGULATION" IS BACK in fashion, from Javier Milei's Argentina to the corridors of Washington. In India too, the term has found its way into the Economic Survey. For many, it evokes images of shuttered offices and pink slips. But that's a shallow take. True deregulation is more than dismantling the state, it's about making it work better. Sometimes, that means fewer rules. Other times, it means more capacity, smarter hiring, and process redesign.

At its core, deregulation seeks to strip away unnecessary rules and bureaucratic red tape that bog down government efficiency. The goal isn't simply a smaller government. It's a smarter and more efficient one. It is an enabler of economic activity in the country.

Take the Indian Patent Office. Until recently, it took years just to decide whether to grant or reject a patent. It was primarily due to two reasons: Understaffing and complicated/outdated procedures, with the former being the bigger roadblock. Sanyal and Arora (2022), in their Economic Advisory Council to the Prime Minister working paper titled "Why India needs to invest in its IPR ecosystem?", documented the level of understaffing in Indian patent office and the problems it was creating. Even after increase in manpower over the last few years, India had only about 800 people in patent office. Compare this with 8,125 in US and 13,804 in China. Naturally, it took years to process the applications.