All articles of law create obligations and impose restraints on government action. Laws that govern economic activity, for example, limit business entry and exit, product price and quality, whereas social laws alter individual or organisational behaviour. The process through which rules are drafted and enacted, the authorisation to state action that rules provide and the constraints on private action that rules sanction have a bearing on enterprises and everyday living.

This paper, the second in our series of papers on the state of regulatory quality in India, provides a simplified guidepost to improve regulatory hygiene in India. We outline benchmarks to guide rule-making and establish checks on government action.

Through an extensive literature review, we identified practices that must be encoded into the rulemaking process. These are categorised under three heads:

Democratic Safeguards are procedural checks that help ensure a participatory, transparent and accountable rulemaking process. Ex-ante, this involves increasing public access to the rule-set (including accessibility in terms of language), a serious consideration of stakeholder views and a rigorous assessment of the costs and benefits. Ex-post, this involves a review to assess the validity, cost-effectiveness and efficiency of the legislation.
The use of tools throughout the lifecycle of a regulation, from drafting to sunset, allows a rule-making body to manage the flow and stock of regulation. We find that countries like Sweden, the United Kingdom and Australia use different mechanisms to ensure that the interests of the affected parties and the public at large are heard and honoured by decision-makers.

Legal Safeguards are checks on executive discretion. While executive discretion is inevitable, it ought not to be unguided and uncontrolled. There is a thin line between discretionary powers and the arbitrary exercise of powers. Rule of law demands that the executive ought to operate within a constraining framework that provides express legal authorisation to procedural checks against excesses.
In particular, procedural checks ought to be placed on the rule-making (quasi-legislative) and decision-making (quasi-judicial) functions of the executive - both of which affect the rights and duties of the regulatees. In the United States, for instance, the Administrative Procedure Act provides standards to guide administrative action and encodes the duties of procedural propriety in law.

Economic Safeguards are substantive checks on the way a rule-set impacts economic freedom. Rules that regulate economic activity are guided by consideration for both market participants: enterprises and consumers. While India is influenced by different frameworks including World Bank’s Doing Business in carrying out economic reforms, it lacks a lucid and explicit regulatory philosophy of its own to guide economic laws.
Most high-income countries such as Hong Kong and the United States share certain features and values that guide their economic laws. This includes a high degree of openness (allowing for easy entry and exit for firms), low economic burden, increased competition, an enabling environment for the private sector and greater consumer choice.

Drawing from global best practices and indices around the world, we propose a checklist (for primary acts) to measure the quality of rules currently on the books in India. The checklist is a set of distilled minimums based on these three safeguards, that any rule-set ought to conform to. These do not apply to any one department, regulator or agency but to all.

A check-list approach to evaluate laws currently on the books will help diagnose the distance individual rule-sets have to cover, along with guiding future law-making. While there have been efforts in India to evaluate the impact of single rules, little attention has been paid to a comprehensive evaluation of all regulations, across industries over a period of time to assess the cumulative cost of regulation.

High-performing countries persistently strive to introduce such institutions and mechanisms to create a transparent, answerable and accountable government. To build a well-functioning and non-intrusive regulatory regime we in India need to similarly introduce a ‘set of institutions and processes that embed regulatory review mechanisms into the everyday routines of governmental policy-making’ (Morgan 1999: 50). In sum, what we need is a whole-of-government approach for regulation of regulation.