WASHINGTON, DC – When India’s prime minister, Narendra Modi, was on the campaign trail, he promised to improve the way the country is governed. Since taking office in May, he has strived to deliver. Recently, he declared that he wants to boost India’s position in the World Bank’s “Doing Business” survey, which assesses the regulatory climate in 189 countries. Modi’s goal is to lift India into the top 50 – a bold ambition given that the country currently sits at 142.
Cutting bureaucratic red tape can help foster a culture of entrepreneurship and dynamism. But putting in place an effective regulatory and enforcement infrastructure can be equally important, especially in areas where consumers have difficulty assessing the value of products and the risks they can pose.
In all countries – but especially in developing economies – a robust regulatory system is essential to building trust in the marketplace. Consumers need to know that the food they eat, the cars they drive, and the medicines they take are safe. Confidence in local products boosts domestic consumption and makes exports more attractive in foreign markets.
By contrast, a country riddled with regulatory shortcomings will find its arteries of commerce clogged and foreign investors spooked by unpredictable quality and unfair competition from unscrupulous producers. In developing countries, “poor quality regulation and implementation are formidable barriers to entrepreneurship and investment,” according to a World Bank report. “Regulatory failures expose people and the environment to horrific risks.”