P Chidambaram Says India’s Regulations Are Worse Than 1991

Former Finance Minister P. Chidambaram has launched a sharp criticism of India's current economic framework, arguing that the country is facing a new form of “rules-and-regulations raj” that has become as restrictive as the old licence raj.

Speaking at the Business Today India@100 event, Chidambaram said India’s present economic approach was constrained by excessive regulation, investigations, enforcement actions, bureaucratic hurdles and what he described as crony capitalism.

He also invoked the economic reforms of 1991, saying the country today lacked an economic strategist comparable to former Prime Minister Manmohan Singh.

‘Current Regulations Worse Than in 1991’

Chidambaram argued that India's regulatory environment had become increasingly restrictive despite the economic liberalisation initiated more than three decades ago.

According to him, the current system is trapped within four major constraints: regulation, investigation and enforcement, crony capitalism, and bureaucratic hurdles.

He said the present framework was different from the licence raj that existed before the 1991 economic reforms but argued that its impact on businesses and economic activity had become equally formidable.

Chidambaram also questioned whether the current economic model was based on sufficient analysis and expertise.

Chidambaram Invokes PV Narasimha Rao and Manmohan Singh

Referring to the 1991 economic reforms, Chidambaram drew a distinction between political leadership and economic expertise.

He referred to former Prime Minister PV Narasimha Rao as the political executive behind the reforms and Manmohan Singh as the economic strategist who played a key role in designing India's liberalisation programme.

Chidambaram argued that strong political leadership alone was not enough to guide a complex economy and that governments also required strong economic expertise.

Questions Government’s Manufacturing Strategy

The former finance minister also questioned India's current manufacturing push, particularly government support for the semiconductor sector.

He argued that companies setting up semiconductor facilities were receiving substantial public subsidies and claimed that a large portion of investment in such projects was being supported through public funds.

Chidambaram said India needed a broader and more ambitious manufacturing strategy.

He pointed out that manufacturing's share of the economy remained around 14%, arguing that the sector had not yet achieved the transformation envisioned through various government initiatives.

He called for stronger domestic manufacturing capabilities and greater efforts to reduce dependence on imports.

‘India Must Build Its Own Manufacturing Capacity’

Chidambaram said India remained dependent on imports for raw materials, capital goods and industrial components, particularly from China.

He argued that even in sectors where India lacks access to certain resources, including critical materials, the country should focus on building domestic manufacturing capacity and developing alternatives where possible.

According to him, India's long-term economic strategy should focus on strengthening domestic industrial capabilities rather than relying heavily on imports.

Raises Questions Over India's Free Trade Agreements

Chidambaram also criticised the scope of India's free trade agreements, arguing that many of the agreements were with countries that represented relatively limited trade opportunities.

He questioned the absence of broader trade agreements with several major global economies and said India needed to expand its trade engagement with larger markets.

While acknowledging that negotiations with countries such as the US and China were difficult, he argued that India required trade agreements capable of supporting its growing economic ambitions.

Concerns Over Shrinking Competition

Another major concern raised by Chidambaram was the growing concentration of economic power across several sectors.

He argued that industries including telecom, petroleum, cement, steel, airports and ports were increasingly moving towards monopoly or oligopoly structures.

According to Chidambaram, a competitive economy requires strong institutions capable of preventing excessive market concentration.

He also criticised the effectiveness of the Competition Commission of India, arguing that the regulator needed to play a stronger role in scrutinising mergers and maintaining competition.

Chidambaram Calls for a More Competitive Indian Economy

Chidambaram's broader argument was that India needs an economic framework focused on greater competition, stronger domestic manufacturing and reduced bureaucratic barriers.

He maintained that the country should revisit its economic strategy and develop a clearer long-term vision capable of addressing challenges related to manufacturing, trade, regulation and market concentration.

His remarks add to the ongoing political and economic debate over India's growth model, industrial policy and the role of regulation in shaping the country's business environment.