Manish Sabharwal Shruti Rajagopalan Deregulating The Economy

TITLE: Manish Sabharwal, Shruti Rajagopalan - “Deregulating the Economy” | 6th GW India Conference CHANNEL: Institute for International Economic Policy (IIEP) DATE: 2026-04-24 ---TRANSCRIPT--- services and we’re also joined in person by Shri Raja Gopalan who is senior research fellow at Mercada Center at George Mason University. I’m going to hand things over now to Rick.

Perfect. Thank you. Well, it really is, I think, a good follow on, I think, from Sukarin’s uh conversation and how he kind of wrapped things up. It is great to have a conversation like this at GW talking about deregulation. It’s a bit of a breath of fresh air in some ways because we’re talking about uh tariffs and trade deals and immigration, things like that. And um but but a lot of times, you know, when you actually sit through business planning, you realize a lot of those issues tend to be uh maybe the icing on the cake, maybe even just the sprinkles on the cake. uh the fundamental structure about what makes the market is uh is the regulatory issues that drive whether a business can produce something, grow, take off and things like that. Um so I think resetting the conversation to looking more at deregulation uh is uh is certainly very vital and we’ve seen uh as as Dr. Nekaswarren brought up a new momentum I think in Delhi because of concerns about global instability. Uh the recognition in India that frankly a lot of the tools for growth are not held in Washington, they’re not held in Brussels. uh they’re held in Delhi, they’re held in Bubaneshwar, they’re held in Bopal, they’re held across India in in a lot of places like that. Um we are seeing you know like I said a bit of a spark uh some issues that uh I’ve been working on since I had a full head of hair and uh insurance reforms moving to 100% and the GST reforms and nuclear and of course Alyssa was so deeply involved in civilian nuclear cooperation across many uh many years. So it’s great to see the government uh finally putting their stamp on some of the issues that have been outstanding sometimes for uh for for a generation. Um but u you know the one concern I almost have in some ways is that uh is that momentum going to be sustained because despite the headwinds despite the tariffs what happened last year trade grew by 13%. You know the the the the actual impact of some of these policy issues is sometimes less than we kind of imagined. So if India is growing at 7%, if trade with the United States is still growing very strongly, is there going to remain that momentum for big domestic reforms? Uh really fortunate to have two terrific speakers uh that are able to cover this from from multiple incredible angles. uh Manish Aaral of course co-founder of uh teamly services and Manish I would say among founders executives has always made himself extremely available for those of us in the policy universe to try to share practical business experiences and how that kind of relates to the policy issues that we deal on a day-to-day basis that link that Manish has always brought has been very terrific of course team is India’s largest staffing services company in India um he’s on the governing board of the new India foundation ne capital NC and right column Uh for Indian Express earlier been on the RBI board. So a terrific set of experiences uh from Manish. So Manish uh thanks for joining uh all the way uh many hours away but appreciate you being here and the floor is yours. Thank you Rick. Appreciate that. So I’m sorry I’m not there in person. Um I know Shri is my co-panelist and um she has a wonderful project called the 1991 project. Um I think that year was very impactful but it was incomplete in my mind you know not only because India and China had the same per capita GDP in that year and now they are five times more than us but because 35 years later we still have 45% of our labor force on farms. So why hasn’t the flow of jobs since 1991 changed the stock of jobs since 1975? And um if we could sort of create mass democracy on the infertile soil of the world’s most hierarchical society, why didn’t we create mass prosperity? And I think all of you sort of understand where our lack of mass prosperity came from. There was the 1956 Abadi resolution which murdered entrepreneurship. But um the question for us in 1991 and it’s been 35 years since then is is now what can we do now? And pardon me for being a little disillusioned with monetary policy and fiscal policy, right? I’ve spent a few years on the RBI board. I’m haven’t decided whether monetary policy is a placebo or a painkiller or a steroid. It’s definitely not a way to create mass prosperity even though macroeconomic stability is very important. And on the fiscal side, you know, I’m now on the board of the controller and auditor general, and we’re spending a lot of time trying to create transparency for central and state government funding and debt, of course, but government spending has gone up 108 times since 1990 and um per capita income has gone up eight times. Government spending is very important, but um it’s unclear to me that if fiscal deficits could make countries rich, then why would anybody be poor? we’ve already reaching sort of 80 90% of public debt to GDP. So while um the budget and fiscal spending is important, we spend 105 lakh well we spent 80,000 crores in 1990 and now we spend about 115 lakh crores but um I’m not sure that’s also the explanation for master authority. So obviously structural reform, you know, Rick hinted at that, you know, we don’t have a shortage of land, labor, capital, but why doesn’t it combine in ways that um 63 million enterprises translate more than we only have 31,000 companies with a paid up capital of more than one $1 million? Um so there is obviously clearly something going on. I’d like to make the case to you that infrastructure, skills, and finance are shifted from being a dagger in the heart to a thorn in the flesh. they are still problematic. They need to improve, but they’re not the binding constraint anymore. And I think sort of my case to you would be regulatory cholesterol has been the binding constraint since 1991 where while we opened up um quite a bit, but we left out education, we left out regulatory cholesterol, we left out a bit of banking. And you know, as Daniel Carnean used to say, when you want to go faster, most people will sort of jam their foot on the accelerator, but sometimes it’s better to take your foot off the brake. And I I used I’ve used regulatory cholesterol for a long time. It’s and sort of somebody many people in the government then said, you know, will you stop this English criticism? What do you mean by regulatory cholesterol? So then we took four years to sort of put together a database of compliances and we ended up giving a list to the government of 26,000 ways to go to jail, 6,700 filings and 67,000 compliances. And this is what I call regulatory cholesterol and it sort of arises from six sort of pathologies. Um the first one is the compliance blind spot. You know the government reads from left to right. They read acts and they read rules and then they stop. Right? But we read from compliances and 17 other instruments that the administrative state has invented. You know, guidelines, circular notification, office order, government memorandum. These are and the constitution, I’m not sure, was was always clear that there’s only one level of subsidiary legislation. The parliament passes laws and the executive is authorized to make rules, but it has to notify it. So the compliance blind spot meant whenever I was talking about these 67,000 PE uh compliances, people in government didn’t understand what I was saying and I wasn’t talking about best practices. I said I define a compliance as anything in your administrative acts, rules and instruments that we have to do mandatory and if we don’t we are punished. Part of where why compliances was a problem was because out of the 67,000 26,000 had a jail term. So the excessive sort of criminalization was not a debate that we had in India and nobody had interrogated the administrative state. So what should we use jail for is a is an interesting question. Right? Stupidity is not illegal and it’s definitely not jailable. But the Ministry of Corporate Affairs has a 10-year jail provision for fraud, but they have 128 2-year jail provisions for stupidity. you know, filing a form late, filing a meeting date or, you know, we’re probably the only country in the world to make ticketless travel in railways um available provision. But out of the 800 cr travelers last year, there were only eight cases filed. So clearly this is not working as a deterrent. In fact, when we proposed to the ministry that you only got eight cases filed, they said, “Oh, your deterren’s not working.” They said, “Look, only eight cases filed. Our detrant is working.” And for example, check bouncing is is sort of um unclear to me that check bouncing should be a criminal provision, but it’s 4.3 million cases. It’s 15% of India’s court pendency is criminalization of check bouncing. Anyway, we have had a nice bundle of decriminalization. I’ll come to that later. So all these examples are now moot and that’s why I’m sort of phrasing them. But there were sort of six blind spots, right? One was the compliance blind spot. The other was the excessive criminalization blind spot. The other was the sort of prohibited till permitted mentality. You know, I’ve been asked 108 times in my life by a bureaucrat, who allowed you to do this? And that’s a profound question from a theory of knowledge perspective, right? Everything’s prohibited till permitted. The instrument proliferation, which I already talked about, enforcing the uninforcable, right? I mean, what is corruption? Corruption is the transmission losses between how the law is written, interpreted, practiced, and enforced. And that’s where the original show me the person I’ll show you the rule comes from. Yet our laws are never subject. For example, ticketless travel eight cases filed for 800 cr travelers. You’re trying to enforce the uninforcable. And the sixth one was there never has been a single source of truth for India’s laws and acts and it still doesn’t exist. For example, if you want to and and the Supreme Court is quite clear on this that silent laws or unnotified instruments can’t really be applied yet we don’t have a single place where all this is. So how should we deal with this regulatory cholesterol? I I think there are three things. One is decriminalization, one is um deregulation and the other is digitization. Decriminalization. We had made an attempt a few years ago. It was called Januas 1.0. But at that point the technology adopted for decriminalization was we’ll write to every ministry and we’ll ask them to surrender their jail provisions. And I had sort of fought back saying look nobody cuts the tree they’re sitting on. And anyway they ended up with 50 out of the 26,000 being removed but they took the bill to parliament. So this time around there was a recognition that what we had done last time didn’t work. So we framed a set of principles called the decriminalization principles. The ministry of commerce and um NITO issued them to every ministry saying harm to others is it covered by another law. there’s about five principles and then every ministry was uh required to apply this to their criminal provisions and then that was interrogated by a special committee. So the Janvishwas bill which was passed 10 days ago combines with the labor codes which were passed two months ago combined with the decision to repeal 100 laws and combines with the decriminalization of the companies act which has just been passed to remove about 12,500 of these compliances. So while it’ll the you’ll see a headline number of 100 provisions but that provision was used many times. For example, one criminal provision in the environment protection act it was just one jail provision but it was used 80 times to create criminal compliances. So I think decriminalization there’s still a lot left. We didn’t decriminalize check bouncing. We didn’t decriminalize gamcha manufacturing on a power loom. We didn’t decriminalize an admission test by a school which has more applications than student seats. But um I think we’re getting to the acceptance of the three things. I think decriminalization is the furthest ahead. Deregulation we’ve just issued a set of deregulation principles. We want all licenses outside four areas national security, public safety, human health and environment to be substituted by self-registration. We all want licenses to be perpetual. We want inspections to be random and risk based and we obviously want a single source of truth. So this deregulation principles are just been starting to the same process. Every ministry is now applying it to the inventory and digitization would sort of be replicating digital public and infrastructure for enterprises. Today we have 26 different numbers by every for every employer. We’ll move to a single number that has been accepted. We have digil locker where all documents for citizens are paperless, presenceless. We we don’t have that for employers. We don’t have we define digitization and government as PDFs but we need to move to an API framework. The most important one which has now been accepted is a website called India code where by mid next year you will sort of if the law is not there you don’t have to comply with it and if the law is on India code you have to comply with it. I mean many days it feels like banging against a wall and last but I think there’s a sort of a a window here whether it is you know pressure from the global drama whether it’s geopolitics or the tariff drama or whatever else but I think a combination of the qoss the environmental laws the janvishwas the labor codes the coastal norms I mean every factory now has 25% was green cover 15% so we’ve essentially added we’ve removed that a few months months ago. So now every factory now has 25% they can do the green cover outside the factory land rather than inside. I think the challenge for all three still continues. The status quo for example the June deadline for next year for restricting instruments has been countered by many ministries saying if you implement this that we can only use two instruments the business of the government will stop. The decriminalization of the tax code didn’t happen because they revenue said they tax revenues will go down. Um maybe there’s some truth to it or maybe they’re just negotiating in a difficult way. But I think obviously if you step back and hear what I’m saying, you’ll say that, you know, equating deregulation without civil service reform may be a fool’s errand. Even if you clear the stock, the flow will continue unless we change these six mentalities. But I think that would be a mistake. I think that civil service reform, and I’m not talking about 6,700 IS officers. I’m talking about the 25 million civil servants which are really the executing edge of this this thing. But the time for that has not not come. I think there’s nothing more powerful than an idea whose time has come. Decriminalization and is an idea whose time has come. So we’ve just done Dan Vishwas 2 but we’re already preparing for Jan Vishwas 3. Digitization all the four projects ueen API setu entity digil locker and um India code have already been accepted by the cabinet. So now deregulation principles will be applied over the next few months. I I think we have a framework. Deregulation is much harder than decriminalization though in people’s minds um decriminalization was a part of deregulation. Um because it’s in the eyes of the beholder there there’s a much deeper argument to be had but I think it’s also an idea whose time has come. So in my mind you know while we took away many of the binding constraints we we kept looking outwards rather than looking onwards right shifting from the bird’s eye view of the daily life of employers to the worm’s eye view of the daily life of employers you know for fiscal and monetary policy tends to look at the daily life of employers from too far away I think the political economy also looks at it from too far away unless you shift to the compliance world to say there’s 67,000 ways where the government has told people taken away their freedom and mandated you do something obviously nobody’s means deregulation means no state otherwise what valley in Afghanistan or Waziran in Pakistan would be hot beds of entrepreneurial activity I get a push back for deregulation saying you’re trying to give punas for to employers I don’t think that’s what we’re asking for all we’re saying is deregulation has struck the wrong balance between excessive criminalization excessive regulation and and nothing else So well reggulated markets is the way forward. So I’ll pause here and look forward to hearing to sh from Shi and I’m sorry again for being online. Thank you Manish. Uh I don’t know if my tears are laughter or sadness from uh all those very cogent examples about things that are done but yet so many things that are yet to uh to be done and the government’s approach. Um but it is great that all your terrific work and your practical experiences it sounds like is gaining you know some traction right now in in some ways. Um well next up uh we have Dr. Shui Raja Kopalan of course a senior research fellow at the Mercada Center George Mason University a fellow at the classical liberal institute in NYU innovation fellow with Smith futures host of the ideas of India podcast and perhaps most importantly also built the uh get down and shooty website. So if you haven’t seen that, a lot of great insights there as well. So uh Shrui the the floor is yours here. Great. Uh thank you Manish for your excellent remarks. Sorry few minutes on Zoom while all this goes on must be excruciating. Uh and u good morning to all of you. It’s a pleasure to be here. Uh we’ve had a lot of discussion about structural transformation today morning. Uh but and this is some of the work that we’ve done with the 1991 project. A bunch of researchers. I’m going to talk to you about the most unsexy parts of the structural transformation. Right? And if you are not sad and bored to death by the end of this, but talking about land legislation, which is land sealing laws or agricultural land conversion laws, I haven’t done my job if you’re not asleep by the end of this. So that’s really my goal. Okay. Um, now every developing economy, you know, needs to go through structural transformation. Basically, agricultural productivity has to increase. Farms must turn into factories. villages must turn into cities. Right? This is fairly straightforward. Now, for all of this, land becomes both the critical or the essential input and also the essential bottleneck. Now, land has some strange characteristics which you all know, but it bears repeating. Okay? Land is immobile. It cannot be imported. It is inelastic. Space is not inelastic, but land is. And it is therefore much more likely to be trapped by bad regulation. Right? And I’m going to discuss two specific kinds of very bad regulation uh today. And um when I really talk about what kinds of um okay what kind of issues you have with structural transformation when it comes to land what we really mean is resources cannot move to their highest valued use. Right? And when we say resources cannot move to their highest valued use that means agriculture can’t be more productive which means farmers cannot make their existing agricultural plots of land more productive and they can’t easily turn them into factories or data centers or knowledge centers or any one of the you know many things that it involves to get to vixed bharat. So now I want to start with something that’s not exactly agricultural productivity but it’s a very close proxy which is serial yields right India’s right at the bottom of this so step one of structural transformation make Indian farms more productive so India is below Bangladesh it is below Sri Lanka it just about sits above you know Africa the entire continent and there wasn’t enough space to disagregate this it’s hard enough to see as it is right China is way ahead of India and has been way ahead for a really really long time now. This is mainly because of land sealing laws. At least that’s what I’m going to persuade you about. So what are land sealing laws? Exactly what it says. There is a literal ceiling on the size of the holding of land, right? So there’s a roof and once you hit it, there’s a problem. Now what does that mean? If you hit the roof, the government will take your surplus land away and redistribute it or vest it for a government project or something else. Right? Most states have enacted some kind of agricultural land sealing law, right? There’s also urban landing which I don’t want to go into just yet, but this is just agricultural land sealing. Many of them have more than one land sealing law which include, you know, part of it was in the land reform law and some of it is in the land sealing law. Right now as a consequence of this it will not come as a surprise that the average land holding size in India is 1.08 hectares. Some of my neighbors in false church have backyards larger than this. So this is a really really big problem and that’s the reason the agricultural productivity is so low. So now what does this actually mean? I’m going to walk you through the Karnataka law because Karnataka wants to industrialize. It’s a place where you can have factories, you know, coffee farms, start farms, data centers, AI firms, all of the above, right? But it’s extremely under urbanized. If you look at Karnataka, it’s actually vastly agricultural even today despite being an incredibly rich state. Now, what does land ceiling really entail? It entails two kinds of categories. So, one is based on the number of people, right? So, it depends on are you an individual or are you in family? And if you’re an individual or a family, you will get n number of units. And units are not hectares. Units are a piece of land depending on the classification of land because if it’s not convoluted, could it even be Indian? Right? And what would that look like? Uh the the piece of land really needs to either be irrigated or not irrigated or dry land or could be irrigated by the government one day or could be privately irrigated. I mean these are the crazy crazy classifications. So based on which classification one falls into caps your land. Now as you would imagine we do things in India the most irrigated or productive or wet land will have the most severe caps because the original goal was redistribution. So in states where there is a lot of dry land like Rajasthan the the cap is actually much more flexible right. So in places like Kerala which are full of wetlands your caps could be as low as four hectares right in places like Rajasthan it could be like 30 hectares. So that’s a really important difference. So now what that does is the unintended consequence of that is you basically have different classes of land. you’re not incentivized to irrigate and we have made India’s most technically naturally productive land the least productive by completely strangling the size of the land holding right so this is basically in a nutshell what the land uh what the ceiling law does now we’ve done a lot of work I don’t want to we have 30 pages of tables this is all on the 1991 project it took weeks and months to go over all these laws so I encourage all of you to look at it and I don’t want to put terrible graphs across 30 different statutes. But Karnataka is pretty representative. I’m not showing you the worst version. Right now, as economists, we usually I study perverse unintended consequences. But with land sealing, what I actually study is intended consequences. The law got exactly the consequences it intended, which means the size of the land holding became really really tiny. India doesn’t have primogenature in terms of its inheritance laws or custom which means with each successive generation the plot of land kept shrinking and now what is a consequence of that this right now uh Punjab has the highest bottom ceiling that is for individual landholders this is the ceiling and that is 3.62 62 hectares right sorry this is the average operational land holding size so for Punjab it ends up being about 3.62 62 for Kerala it’s 0.18 hectares I dare say my backyard might be larger than that right so Kerala is really really tiny pieces of land it’s extremely unproductive and I’ll get to some other issues with Kerala everything else is kind of the middle of the pack right so this is a fundamental problem and you have the direct consequence by the way this is only going to get worse because there will be more successive generations Right. U now the government knows this. So what has the government done? We still need to have educational institutes. We still have a sugar lobby. We still have uh you know all sorts of coffee lobbies and um plantation land and industrial lobbies. So instead of repealing a law that is fundamentally stupid, we’ve created a set of exemptions. Right? And these are just the exemptions for Karnataka. Different states have different levels of exemptions. just read the law or you can read our paper to spare yourself the trauma of reading the law but it’s pretty extensive there is no easy way to show you this in a table otherwise I would have right now there are new exceptions that have come in which are not the original exceptions which I showed you which is now even within agricultural farms you have to have stud farms or you have to have APMC markets right the land holding size is way too small so now how do we solve for new layer of exceptions within the agricultural law. Now almost all states have some version of this. You know start farms are more likely in Karnataka than they are in Jark. So there will be different kinds of exceptions but the exceptions tell you exactly which lobby is powerful in which state. So it’s a it’s a nice exercise in you know public choice. Now the consequences is basically the land holding size gets smaller. So now how do we deal with this in India? Instead of repealing the land sealing laws, we add a new set of laws which are consolidation and fragmentation laws. Okay, what do those mean? They mean now we’re going to place a minimum floor below which we will not recognize your plot of land and we will punish you for it. Right? So if the if the piece of land goes below a certain threshold then the government will say we’re not going to register it or it’s going to have additional fees or depending like pick your state and pick your poison and there will be something stupid on the bookspread and this is obviously a direct consequence of the ceiling laws right so this I mean if you remove the ceiling laws then you wouldn’t need the consolidation and fragmentation laws but this is where we’re at so not every single state has consolidation and fragmentation laws but I think more and a dozen do you know give or take. So now the minimum land holding size is prescribed, the maximum landolding size is prescribed. The only thing unknown is how many children a family has, how many girls, how many boys though and now even women can inherit and how this actually plays out in the next generation. Right now what are the consequences of small land holding? Now the obvious one is agriculture is extremely unproductive, right? But it’s also very difficult to sell to other farmers because an existing farmer the land may if they purchase your land they may be above the ceiling at which point the government will take that land and redistribute it making the point moot. The reason I only include selling to farmers is we have another whole class of agricultural laws which prevent farmers from selling agricultural land to non-farmers. Right? So this keeps getting worse. uh I strongly recommend not working in this area because each law you pick you will get for actually on the other hand it’s a growth industry and AI hasn’t outco competed us yet right uh the second major unintended consequence is there’s no incentive to irrigate land to make it more productive right if you irrigate land or if the government irrigates your land and now you are under the irrigable land if you’re over the limit the government will take your land away right so This all sounds I know some of you are just looking astonished. I promise I’m not making any of this up. Okay, not even a little bit of exaggeration. So now the only option left for the farmers is to switch out of agriculture. Right? Except that is not an easy task either. That’s the next set of unsexy laws I will walk you through. So this is the second paper that we did. This is just on agricultural land conversion. We looked at over 50 primary statutes across 20 different states. The only states we left out in this one in this paper were the hilly states because they have more complicated agricultural conversion issues. These are implemented like everything from the district collector to the thear’s office all the way up to like I think the state chief minister or maybe god but there are some higher power all included in these 70 offices and committees and u it’s basically just a lot of high transactions costs. So let me walk you through what this looks like. Now to navigate this kind of maze, first you need to have all your documentation in place. Right? To anyone who’s ever inherited anything in India, you know that collecting documentation is no easy task. There are spelling mistakes which is just the start of the problem. Lots of times the paperwork doesn’t exist. You can’t raise the provenence. There’s nothing in the registars’s office and so on. And this is before you start the process. Okay? This is step one just collecting the documentation. A lot of the collection of documentation depends on state capacity which means it’s not entirely on the individual farmer or the family. Right? Then you have pre-crutiny or tenure checks. Right? This in some of the states uh you basically have uh some the relevant government official who will come and check if you’re in a area with land sealing laws operating. Are you over the limit? Is this land even convertible? Are you in a forest area? Are you in a pesa area and so on so forth, right? Then comes the site inspection or as I like to call it the the fertile ground for rent seeeking. Right? So this is literally when a government official will show up, they will check your land uh and then they will typically ask for a small or a large bribe. Right? Now I think that’s not a big problem. The bigger problem is most states don’t have the capacity to send anyone. Right? So if your pre-application stage you know to collect some paperwork it can take up to a year in Odisha it can take like 60 days in Gujarat just to get your application in order right there are some states like Uttar Pradesh and Bihar where they may not send anyone to verify or anyone for ground inspection for months because they don’t have anyone and these are fairly large states then comes the interdep departmental clearances or where things go to die right so you need multiple different departments Whether it’s the forest department, railways department, irrigation department, pick your favorite department, right? They all need to check off a list. Nobody knows, by the way, what the order of the intergovernmental clearance is. So, you just hope that someone knows what the order is and some middleman can get this done. And then finally, there’s free assessment and mutation. Sometimes fee assessments used to be pretty high in Maharashtra, which recently got repealed. I would like to believe in thanks partly to us. Uh up to 75% of the value of the land was the fee to convert it from agricultural to other users basically making it damn near impossible. Right? So you sell your land at you know throwaway prices to a developer only they have the ability to get this transaction done. Now this is all at the individual stage when you’ve submitted it. Right now next comes the government. the government will have to review and make a decision. Now some of the uh states have like a timebound review that is you know it is deemed approved after a certain number of days or not but most states don’t then they have to actually update the record right this is assuming the state has good records but then they have to update the record that this actually belongs to you it used to be agricultural land now it’s non-aggricultural land it’s allowed blah blah blah right and then the compliance now there are some amazing states where if you don’t start using the agricultural land for non-aggricultural use within a year of getting the certificate, they could actually uh revoke the conversion certificate. Right? So you go through all of this, but if you can’t get your factory started because the factory permit system is no party either, these guys will actually come back and say, “Oh, we thought you wanted to convert your agricultural land to non-aggricultural use. You didn’t do that. You’re just hanging around. So now we’ll take your certificate away.” So this is all an enormous thing that happens. So basically what happens is no one actually goes through this process, right? And the second part of the problem is we don’t know which of these is the binding constraint. There may be some states where the binding constraint is just getting the paperwork together. There may be some states where the binding constraint is they don’t have the capacity to send someone for a field visit. There are some states where the bi where the binding constraint is that the fee is too high. Right? So we literally don’t know what is the binding constraint in which state and which district. The reason I mention this is this doesn’t sit well with the big decriminalize deregulate digitize kind of framework because we don’t know what we are supposed to deregulate if you don’t know what the binding constraint is the second part of that is the moment you remove one binding constraint the next one becomes binding right so Maharashtra has repeal removed for instance the 75% fee right now something else may become binding or will become binding unless they repeal the law Right, I put this up just for effect. I don’t actually expect you guys to read this. I just wanted to show you how hard it is to do this. Right. Uh there are a couple of states. And Pradesh has completely repealed its law. Maharatra has partially repealed the land conversion law. There are some states that have simplified the process which typically means that it can go through a digital portal or there’s deemed approval or something like that. The standard process is these middle states. And then the bad crazy process is places like Kerala. Okay, this is particularly insane in Kerala if you want to convert wetland on which patty is grown. Let’s say patty is no longer you know as productive you’re not getting good prices you don’t have enough labor in Kerala. So they decide that they want to grow rubber instead. Right? For that you have to drain the wet land where patty used to be grown and switch it to rubber. This requires a land conversion certificate. By the way, it’s not just to switch from agriculture to industry or from a farm to a solar farm. You need this certificate in Kerala to move from growing patty to not growing patty. There is a committee. I think they you need near unanimous approval of that committee. There are criminal provisions if you do it without their approval. And if you insist or you know you wish to not grow patty even if the committee has said that you must grow patty you can’t leave your landow because in Kerala they can take your land away or requisition it away under this law and get someone else to grow patty on that land. Right? So Kerala is really the worst of the offenders. They have the worst land sealing laws and the worst land conversion laws. So no wonder everyone’s fleeing to the Gulf. Right? So this is this is a Kerala in in um uh in a capsule. Okay. The other strange thing and I have spent the better part of my adult life studying and teaching law and economics. There is literally no externalities. Normally we require a bunch of clearances because you’re like, “Oh, there’s a fire code issue or you know there’s a there industrial buildings will there’ll be fumes or there will be chemicals and there’s going to be some externality argument.” Now just note that after getting the conversion certificate, you got to do all of that stuff anyway, right? You got to go through the entire industrial process which will eventually figure out if they’re curbing some externality in a rural area. If you’re converting a farm into something which is not dense right like people are not living there there is hardly any industry and to become industry you need a whole set of approvals it’s unclear to me and I have really looked I can’t find the externality right which is the classic argument for these kinds of conversion laws so the conversion law was like this crazy East India company kind of fear we don’t want farmers to stop being farmers we don’t want someone to come and take their land and convert it to something else and make them sell it in a fire sale. This is all coming from there. It has no logical basis. The other part of it given that there are no real externalities. I have rarely studied a law that has no benefits. Usually as a law and economics professor or scholar, what I do is I try and trade off the costs with the benefits. Right? I have not yet found a benefit and I have really looked across 50 statutes and 70 authorities and committees there is literally no benefit to this law right it’s just a massive rent seeking exercise so our recommendation is just repeal the law and Pradesh has done it Maharashtra has followed up I believe has repealed some portions but hasn’t gone quite all the way uh they don’t solve any externalities that won’t be addressed at the next stage when there is a solar farm or when there is a factory or a apartment complex or whatever it is that’s being built they impose enormous costs and um you know there is at least a couple of good examples in Indian federalism to do this uh you’re still awake so maybe I didn’t do my job properly but this is just two of maybe the 40 or 50 land and agricultural related laws which are bottlenecks in India structural transformation so I’ll pause here and I look forward to your questions I’m going to start off with a a question for each of the panelists. Um you know with with Manish I’ll ask about labor. Um I think Shrui I’m interested in how you think urbanization is going to play into this. So Manish you know obviously getting back to your main baywick running um you know one of the largest uh the largest um labor servicing companies in country and you’ve seen the Modi government do some relaxations on contract labor and more recently with industrial relations code. So um you know for your own business and when you talk to companies um how how big of a deal are these things? We see it from a distance. We read it on paper. We show up in Delhi and talk to a few folks. But you’ve got such practical experience. So uh improvements uh a lot more to be done. So kind of give us your your gut check on what’s been happening so far in the area. You know better than anybody in the world. No I mean the labor codes are a really big deal. I know people are focused on the social security implications of it where the gratituity and a few things were the calculation calibration was changed but 70% of criminal provisions were removed 70% of forms were removed almost 80% of forms were removed about 50% of licenses were removed so I think that um obviously we’re not yet uh we didn’t get everything we wanted in the labor codes but we did get a huge amount of power being divorced to the states. So now chief ministers who I think 29 chief ministers matter more than one prime minister for the next 25 years just given the daily life of um employers is so linked to labor markets and land markets and law and order and all and and education and healthcare of course. So I think that um the devolution of powers, the decriminalization, the de uh regulation, I think labor codes are an important way forward. It’s in anyway it’s base camp for the next assault on or the next climb from here but it’s a huge um improvement over what we had um four months ago. uh the top line up to 300 employees now before you need government intervention to to relax and you know we get a lot of complaints and up is considering making that 100,000 so I would yeah so that’ll go away so that that when states start people have already made it a thousand but it’s it’s now and they’ve already restricted when you need it in services you don’t need it you only need in factories but UP is considering making that 50,000 or 100,000 so over time this will become irrelevant and it it don’t kill our holy god was in India, we just starve them to death. Well, you know, Shrui, I think, you know, apart from I think as Manish said, you know, the the power that states have, but you do see the slow pace of urbanization. You know, by some, you know, Indy’s already majority urban probably and by other at least the big cities at least southern states are about to cross that threshold. So there’s a debate on how urban is India truly. But do you see that as as people are slowly moving to cities that there’s a little bit less pressure on land regulations or wonder if you could pine a bit on the impact you think that might have in the future? Is that going to make your job easier? Are there counter pressures you think that going to make it still rigid and tough to move? So the thing is I don’t think people cleanly move to cities precisely because of the problems that I discussed. Right. So what happens is someone will be left behind in the family and like one bread earner or the oldest son will move to the city and then they will keep coming back because this is their biggest asset. We’ve trapped it in a low productive area. Land itself can’t move. Capital and labor can right which means you can’t sell your land. The the prices are are too depressed. You can’t convert it to start a small firm. Nothing can be done. So you just someone needs to occupy it and tend to it and do some kind of subsistance agriculture. So actually I think it makes the problem worse. We would hasten the speed of urbanization both because land would become more easily available but also the labor will be more willing to move and more willing to move permanently and not just seasonally. That’s a good thought. Good thought. Well, I’m going to open up the floor Ash. I see we got a microphone I think that’s uh coming around. Yep. Right up in the front. Um thank you uh for two truly brilliant presentations. This is about the moderation. Yeah, moderation too. No credit. Um I know Manish well. Uh I I know his thought process very clearly but this is the first time I’ve heard Shri. Wonderful. Truly brilliant. So so thank you. Here is the uh and at one point in my life I worked seriously my first book is on agriculture. I I worked for about 10 years on that. Um um so here is the question um for Shruthy um in particular and this is linked to the point you’re making about urbanization um we have certainly um in um most comparable parts of the world let’s say China h which with India is compared and legitimately so s and everything um where the urban or structural transformation and I raised that in the in the morning and you if you were here you my my thought was that really agriculture because this is how we thought about it structural transformation and the idea that structural transformation can be talked about without agriculture was surprising to me was surprising to me right so the China achieved structural transformation without instituting any private property in land there’s No private you can’t you can rent it but you can’t do that and renting is only after in the postm which is when the transformation took place earlier I think the microphone cut out too um just just so if Manish the microphone may have cut there’s another one yep got it switch so so um what what that I’m I’m I I agree normatively with you that a lot of reform is needed uh a lot one shackling of land is needed to to to to as as a normative principle. However, if it’s practically very difficult, if only Andra has been able to do it and Maharashtra partially, if it’s practically very difficult, what is it that we can learn from China about achieving structural transformation in India without getting bogged down in what is one of the most complic historically it’s been very complicated the idea of reforming land markets. This is true of Europe. This is true of right America was luckily didn’t have a serious didn’t have a peasantry actually it didn’t have a peasantry at all it has independent farmers so comparatively speaking it was not an issue in Singapore which did not have peasantry did not it’s in Hong Kong it did not have peasantry America which had independent farmers not peasantry so this is a great question Ashtosh uh two two ways to answer this I’m not a China expert my but my understanding of how China liberalized agriculture is by doing it one at a very very local level right and it also liberalized industry exactly the same way which is your local municipal ward block whatever the equivalent is in China for you know the gram punchay level in India they are the people who made the decision on whether a factory can come and set up whether conversion will be permitted and so on and so forth so one way to achieve this would be dramatic sort of fiscal federalism right like genuine fiscal federalism because if the problem is rent seeking Then one way of dealing with rent seeking is even more experimentation and diffusing those rents across many many many many small places. So that’s one potential way of doing this. Uh another way of doing it is just make it irrelevant at some point right maybe we will you know leapfrog into some very very high yield you know technology for agriculture and our productivity will increase anyway those things we’ve leaprogged before in terms of digital technology in terms of you know going from landlines and wrong numbers and crossed connections to like a mobile revolution so there’s another way of leaprogging I don’t know what AI will bring in terms of agricultural productivity but these are really the only two ways But these laws just need to go at some point if you even need to expand Bangalore a little bit further out. I don’t see what’s the way out. Let me just ask any GW students. Um let’s see if we can grab a couple of questions uh from students there just to Yep. There’s one here and there. Yeah, you got the microphone. We’ve got two back in the corner there. Let’s just grab uh three of them real quick and then uh we’ll have a rapid fire here because we got to wrap up in five minutes. So quick question if you don’t mind. Yeah. So my question is for Dr. Raja Gopalin and um it centers around the recent government policy initiatives especially in south India towards converting land for agroforestry uses. So um what is your perspective on these initiatives and how do you think that um land conversion laws impose binding constraints towards agroforestry? All right let’s grab two more if there’s one more. Yep. Right. Yep. And then we’ll come to this side. Someone there. Okay. Yep. Uh hi. Yeah. Uh I’m also from Karnataka, the more northern regions, the poorer parts, the sugar basin as they call it. Uh I had a question as to what do you think the impetus for the state government would be to sort of get on with the repeal of these laws? Great. We got one more from a student if we don’t mind. All right, let’s wrap up with those two then. Agroforestry and Karnataka. Tough question. Manish, you live in Karnataka. Do you have any thoughts specific to Karnataka before I chime in? Yeah, no, you go for it. Perfect. Uh okay. So on agroforestry you know it’s a bit of a mixed blessing. Now agroforestry I have nothing against it in general. The trouble is usually in most states the way agroforestry is done is now you need to convert from agricultural land but then forest department gets involved. Forest department is the kiss of death officially. Once something is forest land that’s it. It’s over for you. You can never sell it. You can’t do anything with it. So if agroforestry is done in an intelligent way where you’re actually using it more for agricultural land you know integrating it with supply chains and so on great but if it’s going to become forest department land good luck to everyone involved uh the on the second question of what is the impetus you know we did in our paper we showed the difference between Telangana and Andhra Pradesh right so Andra Pradesh repealed its law so let me start at the beginning Telangana Andhra Pradesh had terribly restrictive laws Telangana was carved Telangana started slowly reforming the law and you know some of it was just more digitization you know a TGIP pass things like that but it dramatically simplified the process of converting land right everyone saw the benefits we do a border uh districts diff in the paper which you can just look up and then Pradesh clearly saw that Telangana got these great results over a 10-year period and then they just repealed the law presumably because now they’re trying to urbanize they need to build a new state capital and all these other are issues Right. Uh so there is some impetus. I like u also the task force that uh Manish was talking about. They’ve done a pretty good job in terms of at least recognizing what needs to go right. A lot of times I think the way the sausage gets made in India is states often times don’t have a brain trust. They don’t know what the binding constraint is or what the choke points are. It’s incredibly helpful if there’s someone like Rajiv Gaba and like this high power committee full of really smart people who can say hey this is a problem across every single state we don’t know what the binding constraints are but we also see no benefit to this law can you just remove it wholesale so I think that may be another impetus I wouldn’t go further than that I I don’t uh see much many ways to break the rents well please join me in thanking our terrific two panelists here for outstanding presentations and and to our terrific moderator who has not received enough credit. Good. Well, we’re now going to break for a coffee break. I think until 11:20, if I’m not mistaken. Is that what time? Yeah. Great. So, thanks everybody. Oh.