India's regulatory hurdles pose a significant obstacle to economic growth, Raghuram Rajan, chief economic advisor at the Finance Ministry, said on Wednesday.
"Because regulation is divided among the states and the centre, there are attempts to bring the regulation together. Even that is not a perfectly easy process, because some ministries don't want to let go of the regulations they control," Mr Rajan told NDTV in an interview.
Regulatory delays have held up projects worth nearly Rs 2 lakh crore in the country, which appears set to close the 2012-13 fiscal year ending in March with its slowest economic growth in a decade.
The government in December 2012 proposed a Cabinet Committee on Investment (CCI), meant to expedite the clearance process for infrastructure projects worth Rs. 1,000 crore or more.
China too recently announced reforms to cut down red tape by revamping its bloated government structure with a decrease in the number of cabinet-level entities.
India has too many regulations, Mr Rajan said.
"Small entities get entangled in too many regulations," he said, adding that the regulatory structure should be made more enabling and avoid an "inspector-raj" system. "(We need to) make the regulations in place necessary and workable, implementable and mostly, do what they are supposed to do. There is no point in having 20 regulations and all are flouted; you only increase the cost," he added.
Mr Rajan also said we need to have the states on board to bring regulation together. "It has to be a process of working together with other ministries, but it is something that is doable. But it also needs the states on board, because a number of the regulations are from the states," Mr Rajan said.
According to Mr Rajan, the industry is also affected by "too many sick entities" which are "clogging resources", who aren't allowed to close down.
"We often have various incentives for them to stay small, and therefore, they don't grow out. We don't let them die... For small firms, birth and death is a constant factor in other countries. Many of them are born, but die quickly... (But) sickness is a long prolonged status in India."
With inputs from Agencies
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