Think Tank

Navigating the Indian Policy Making Maze: Lessons from Start-ups

Rameesh Kailasam, President and CEO,
While India has improved its regulatory environment in recent years, business must still navigate substantial obstacles: bureaucratic red-tape and apathy, a legacy of old-fashioned thinking and susceptibility to political influence. Equally, critics would argue, the manner in which Indian industry has lobbied for regulatory ‘favours’ in the past has left much to be desired. Over the years, this has resulted in a degree of mutual suspicion and mistrust between the two sets of stakeholders. Regrettably, ‘policy advocacy’ has come to acquire a negative connotation. India’s start-up boom is, however, changing the way business operates in the country and offering new ways for industry and government to collaborate towards mutually-beneficial goals.

Successful policy advocacy is about taking a holistic view of things…

…as well as accurate stakeholder mapping

Manners and Approaches in Public affairs

In navigating the realm of public policy, it is vital to view issues holistically. What matters is not just outcomes but also the processes that lead to those outcomes. Central to the discourse is people (with their individual priorities and motivations) on the one hand, and processes on the other. Any process will involve multiple stakeholders – economic, social and political – and it is essential to know who is for, and who is against, a proposed action or policy. This requires stakeholder mapping, which means separating both people and entities into three categories: neutral, negative and positive. The goal is to hold on to those who are in the neutral-to-positive band, while moving those on the ‘negative’ side to ‘neutral’ or ‘neutral-positive.’ In many ways, it is an art to influence thought processes and overcome existing biases.

The on-ground situation tends to evolve rapidly, so it is imperative to have strong intelligence

In a fast-changing environment, on-ground intelligence is fundamental. Government dynamics tend to be highly fluid, and public policy is itself an evolving, ongoing process. The working assumption is that there are always roadblocks at every step along the way. Things cannot be taken for granted at any point and it is important to have mitigation measures and counter-arguments in place. Moreover, it is vital to understand that, across geographies, stakeholders vary in terms of culture and expectations. Europeans and Americans tend to focus strongly on engagement, whereas Asians are usually a bit more flexible. There is, however, no one-size-fits-all approach that works.

Most communication with government is process-driven, but individual-specific communication also matters

Working with the Government

The medium of articulation matters, particularly with government. Most communication with government is process-driven, usually taking the form of letters and papers that are written for or sent directly to Ministers or Secretaries. One might also consider speaking to the media or engaging in a public debate via articles and opinion pieces. However, there is also a place for less process-driven, more individual-specific communication. Indeed, at times, key individuals within government can make all the difference to the success or failure of an initiative. For example, India’s Ministry of Road Transport & Highways recently began monetising the vast amounts of data it holds, whereas other ministries have been hesitant to do so. The appetite to undertake new projects or see them through to completion will vary sharply across departments.

It is imperative to understand the Centre-state dynamics, as well as those within a particular government

Equally, it is important to recognise that the Central and state governments often do not work in unison; often, they are on opposing sides of the debate. This makes it imperative to occupy the ‘middle ground’ between the two – something that requires one to leverage various mechanisms. The dynamics within a government also shift over time. During the Modi government’s first term, the PMO drove most policy- and decision-making. However, by its second term, individual ministries had built up considerable experience and bench-strength. Today, not everything is driven by the PMO, and certain ministries now hold significant decision-making authority.

Labour, tech, FDI, tax and market access are the big talking points

Themes and Issues

Business-related public-policy issues can be bucketed into a handful of categories. The first is labour laws and policy, including rules around hire-and-fire, labour unionism and so on. The second is technology and environmental policy, which increasingly has become a fundamental driver that can alter the way business functions. The third is the set of policies around FDI and taxation – which includes direct and indirect taxes, import duties, etc. Finally, market access – the ability of businesses to enter or exit a market and issues around competition – is a critical focus area.

With changing business dynamics, policy advocacy must to evolve rapidly

Key Focus Areas

The dynamics of business are shifting rapidly and so are the end-goals of policy advocacy. Consumption patterns and behaviour are evolving, with virtually everything now available at the click of a button. To cater to this, businesses are adopting cloud-based, asset-light models. Without necessarily owning physical assets such as shops (or even the products they sell), they are able to provide a range of services. At the same time, investors are likelier today to seek growth, not dividends. In a tech-driven investor economy, valuations are soaring and companies are continuously in acquisition mode. All of these trends have a bearing on policy. For its part, business must offer new ways for industry and government to collaborate towards mutually-beneficial goals.

IndiaTech focused initially on compliance/listing related issues

One of the main reasons for setting up IndiaTech was the sheer breadth of compliance/listings-related issues facing both start-ups and established businesses. There were significant obstacles around minimum promoter requirements, fixed assets on the balance sheet, profitability calculations and so on. Overcoming these issues required more than three years of strategic engagement with SEBI and government departments. The result of all this work is evident in the listing of multiple unicorns in the domestic market in recent months. Moreover, foreign investment into start-ups has risen from ~USD 8-10 billion a year to ~USD 30-40 billion. The key was to go into government engagements with strong conviction but also a sense of nationalism. Demonstrating the public-good elements of any policy action has a critically important role in influencing stakeholders within government.

It has done work in a range of areas around FDI, taxes and other levies, crypto, online gaming and even HRA rules

In terms of market-creation and ease of doing business, there were numerous complexities around the FDI rules, custom duties and GST rates and structures. Currently, there is also considerable debate around whether cryptocurrencies should be banned or regulated. Online gaming is another important focus area. So is the issue of start-ups being able to access the market for government procurement. This is now starting to happen over e-Marketplace portals. An important emerging issue is the prospect of tweaking the HRA rules to include leased furniture and fixtures. Since millennials prefer to rent rather than buy such items, this would help open up a vast leasing market.

The rules around e-Commerce were a sticking point

The emergence of e-Commerce start-ups raised numerous questions around market access and business models. There was stiff resistance from traditional marketplaces, who feared that their business would get impacted. As a result, the government disallowed FDI in inventory-based models, forcing many firms to opt for a marketplace model. There is no better example of how lobbying and political backing are two sides of the same coin and how they end up influencing decision-making.