Kadambari Shah and Shreyas Narla on Continuing the Reform Agenda
Jul 18, 2024
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Research scholars Kadambari Shah and Shreyas Narla discuss policy changes for the Indian government, including competition policy, digital marketplace regulation, labor law reforms, manufacturing growth, and GST optimization. They also touch on past budget announcements, challenges in regulating big tech companies, and navigating India's complex regulatory environment.
India's regulatory environment hinders firm growth with excessive laws and compliance requirements.
Biased competition laws against tech firms can stifle innovation and favor unsuccessful companies.
Complex labor laws in India restrict firm growth and require streamlining for productivity and expansion.
Deep dives
Challenges of Regulatory Environment in India
India's regulatory environment poses significant challenges with 1,536 laws, 69,233 compliances, and 6,632 filings. This regulatory cholesterol discourages firm growth due to low thresholds triggering compliance requirements and excessive micromanagement in the details of laws.
Antitrust Debates in India's Tech Market
India's competition law and draft legislation exhibit a bias against large firms, particularly in the tech sector. The focus on penalizing big tech companies without assessing contestability or consumer surplus can stifle innovation and competition, favoring unsuccessful firms and penalizing successful ones.
Impact of Regulatory Cholesterol on Business Decisions
The overwhelming number of laws and compliances in India's regulatory landscape leads firms to remain small rather than expanding. The low thresholds at which laws apply and the detailed requirements for compliance hinder business growth and innovation.
Complexity of Labor Regulations in India
India's labor laws are highly complex, with extensive micromanagement and numerous regulations that can impact business decisions. The multitude of laws, compliances, and filings create a challenging environment for firms, discouraging growth and expansion.
Thresholds and Labor Regulations Impacting Indian Firms
In India, the focus on industrial export-led growth is debated, with some advocating for a shift towards high-end value chain production while others emphasize the need for industrial employment-led growth due to the scale of the labor force. The majority of India's industrial firms consist of micro, small, and medium enterprises, with micro firms employing less than 10 people. Absurd labor regulations, such as low thresholds triggering costly compliance burdens and outdated laws from the 1940s, hinder scale and prevent firms from expanding beyond 10 workers.
Overhauling Labor Regulations and Increasing Thresholds for Growth
The labor regulatory environment in India is characterized by micromanagement and outdated laws that impose significant compliance costs on firms, hindering their growth potential. The need to overhaul the existing labor regulations by eliminating unnecessary micromanagement and increasing thresholds for firms to scale is crucial. By allowing firms to expand beyond restrictive thresholds and streamlining labor laws, the country can encourage productivity, investment, and overall economic growth while enabling workers to benefit from improved conditions.
Today my guests are Shreyas Narla and Kadambari Shah, who are my colleagues at the Mercatus Center and research scholars working with me on the 1991 Project.
We spoke about the kinds of policy change we would like to see in the coalition government led by Modi’s in his third term. We talked about the research Shreyas, Kadambari and I have been working on in the areas of competition policy, regulating India’s digital marketplace, labor law reforms, scaling India’s manufacturing, streamlining GST, and much more.
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Timestamps
(00:00:00) - Intro (00:01:31) - Past Budgets Announcements and Upcoming Budget (00:09:38) - Restarting reforms (00:22:56) - The Tinkering of Government (00:27:08) - Regulation of Big Tech Companies (00:51:35) - India’s Labor Regulations (01:10:33) - Solutions to India’s Regulatory Environment (01:20:27) - Outro
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