Keynote address by Mr Ajay Seth, chairman of the Insurance Regulatory and Development Authority of India (IRDAI), at the release of Centre for Regulatory Governance (CRG) report, titled "Regulatory Governance: The Scope". 

(Hosted in Mumbai, April 24, 2026)

First of all, I would like to congratulate the entire CRG team, and in particular, Professor Subhomoy Bhattacharjee, who has picked up a very relevant topic for economic governance in our country - Regulatory Governance.  

In a world which is export constrained, energy constrained, climate constrained, and which is also facing plenty of risks, it is very imperative that we maximise domestic levers for our growth. And when we focus on that area, appropriate regulations by way of deregulations in various areas, as well as better regulations in others, becomes a necessity for all of us.

The economic argument for regulations is self-obvious - developing markets, promoting competition, protecting interest of consumers - including public safety, and ensuring fair market conduct. Addressing market failures which often get linked with regulations, is also important. But that is not the core purpose. 

I will add two more goals to this list - ensuring fair usage of public goods and services and modifying behaviour of suppliers, consumers, users. But it boils down to a choice between prescription or through nudge. My sense is - the economic incentives or disincentives may be far more effective than prescription - especially in a developing country like ours.

Of course, the regulators also grapple with issues of allocative efficiency, stability and distribution. Here again, a dilemma arises what should be the right balance between Prescription and Principles. 

An activity that is easily reversible if found to be harmful or uneconomical or detrimental to larger economic activities, should be largely governed by principles rather than prescription.   

Prescription is needed for those activities which cannot be reversed, but have a far-reaching impact and stability related concerns. 

There are several activities in the financial world that perhaps require a prescriptive approach. I'll start with sectors dealing with merit goods like education and health. We carry a challenge here, where there is a non-segregation of roles related with policy making, regulating, as well as provisioning of services. Here, the government is also a dominant service provider. Where the roles are not separated, it becomes difficult to regulate properly. 

These activities happen at a very large scale in the private sector also. There are several areas related to usage of resources. The resources may be private, but its usage should be done in a fair manner. The common resources should not be depleted or damaged to the detriment of the overall society. This is in reference to usage of land, permissions related to buildings, constructions and approvals for various economic activities. 

As I mentioned in the beginning, the way forward has to be by way of deregulation, as well as better regulations. 

Deregulation to my mind is not necessarily fair, but it means smart regulations and smart oversight. It also involves building state capacity. Today, focusing on domestic growth is not an option. Rather, it is a compulsion for us. 

I'll mention three significant initiatives which have been taken up in recent years. 

The first initiative has been a task force on compliance reduction and deregulation, which is chaired by the Cabinet Secretary. This is a very good example of cross-agency coordination, iterative problem solving, and real-time learning. Most of the reforms are being done with the co-ordination of the State government and the Central government, so that friction in economic activities can be removed. A good amount of progress has been made on the task force recommendations. Within a few months of its constitution, 76% of the recommendations have been implemented and another 10% are under implementation - which is a good track record.  

The second major initiative has been initiating a high-level committee on non-financial regulatory reforms, which is headed by a former Cabinet Secretary. That committee is focusing on MSMEs, external trade, certification bodies, compliances under Companies Act and environmental laws. Now, this is again an example where the government is working actively towards improving ease of doing business and reducing cost of compliance. 

The third major initiative, which was taken 5-6 years back, is the Jan Vishwas Project. It is a structured approach to build trust-based governance and decriminalize and rationalize offenses. This, again, goes on to smoothen the process of economic activities. 

What is the idea of a better regulation? Regulations which are simpler, lighter, and faster. They are key enablers of competitiveness. They rely upon evidence-based decision-making. They achieve their objectives in the most efficient way.

In this regard, I'll cite again three recent legislative pieces of work about the insurance sector itself.  

Sabka Beema Sabki Raksha Bill was enacted by the Parliament in December 2025. Now, one of the objectives of that Act is facilitating transparency in governance and operations of regulated entities and the regulator. That was the first time an Act was talking about transparency in governance of the regulator. Now, that again is an indication of what the Parliament is telling us - that it has to be a well-governed sector, and the regulator's conduct has to be fair and transparent.  

The second piece of legislation which is in the making is the Securities Market Code Bill, which has been introduced in the Parliament, and is being considered by a Parliamentary Committee. This again, puts a very good framework as to how the regulation should be made, implemented, and how there should be a division of roles and functions within the regulator itself. This piece of legislation, when enacted, will also go a long way in improving governance practices in our country. 

The third piece of legislation was brought in by the RBI of its own initiative. It was a regulation framework brought out in May 2025 for a structured, consultative, evidence-based regulation. 

It needs to be mentioned that in the regulatory world, we quite often jump to focus on how to regulate. But that would be very inappropriate for the economy. Rather, we should ask five questions.

First - Why? What is the problem? 

Second - When? The timing for regulation - should it be regulated at the first instance of something going wrong? Or, should there be enough patience to observe first. Once, the problem becomes substantive, then one can regulate. 

Third - Whom to regulate? Which stakeholder in the supply chain or economic activity has the capacity to correct the problem? 

Fourth - Which activity to regulate? 

Fifth - How to regulate? 

So, as we work towards a faster and more sustainable growth, we have to also look at the kind of questions we ask while framing regulations.

I'll close with one observation – 

What should be the objective function of regulation? 

Option A - Should it be maximizing economic activity, subject to zero non-compliance? 

Or option B - Minimizing the non-compliance with rules and regulations, subject to maximum facilitation of economic activities? 

To my mind, given the country's growth and development aspirations, India needs function B more than function A.

It was a pleasure talking to all of you, and I really look forward to seeing the report on regulatory governance issues, which CRG would be bringing out. Thank you very much.