Let’s improve how we make laws and frame rules by granting regulatory impact assessments a statutory anchor

The inclusion of provisions related to RIAs in India’s recently concluded free trade agreements (FTAs) highlights the urgency to enact a central law on such study-based reports.

Modern FTAs focus not only on border tariffs and non-tariff steps, but also on a range of behind-the-border issues that can affect trade. As a core concept, an RIA qualifies as a good regulatory practice (GRP) in trade terminology.

Free trade pacts often include provisions related to GRPs and regulatory cooperation in aid of deal coherence, as regulatory mismatches can act as non-tariff barriers. Even the draft Plurilateral Agreement on Investment Facilitation for Development has an RIA provision.

India has previously okayed GRP cooperation with its trade partners through broad provisions in some of its earlier trade agreements. For example, India’s comprehensive economic cooperation agreement with Malaysia had identified risk management as a good practice to improve the quality and effectiveness of regulation.

However, India’s real tryst with GRP-dedicated chapters in trade pacts began with the India-UK Comprehensive Economic and Trade Agreement (CETA). This also marked the first standalone reference to an RIA in India’s trade relations.

Under the UK CETA, both sides have recognized that RIAs may be beneficial when preparing “major regulatory measures.” These measures for India cover only legislation by the central government that substantively affects bilateral trade, such as sanitary and phytosanitary (SPS) checks.

In practice, they could cover central government enactments on aspects regulating human, animal and plant life, as well as health, standard-related and technical regulations (and similar subjects), many of which are administered at the sub-national levels.

Yet, on the whole, the scope of RIA-covered activities is limited. Further, it provides for deference to the regulatory authorities of both partners in determining what constitutes a ‘major’ regulatory measure.

In contrast, the RIA provision in the India-EU FTA has broader application. Here, regulatory measures for India cover not only Union legislation, but also rules enacted pursuant to such enactments. Further, RIAs could apply to all matters covered by the FTA.

While the RIA-related provisions in both these FTAs are non-binding, they still require India to promote impact assessments among regulators while proposing major regulatory measures. These are negotiated commitments, and undertaking them in good faith is implicit as a fundamental principle of international law, even if such provisions lie outside the ambit of these agreements’ formal dispute settlement mechanisms. Neither of the two new agreements is in force yet.

Overall, RIA provisions in India’s newer trade arrangements offers us a fresh opportunity for a public discussion on the need for an overarching domestic RIA law. Its use in trade ties has spotlit the need for a legal framework for rule-impact assessments.

Currently, India’s Pre-legislative Consultation Policy that emerged from recommendations of a panel of secretaries in 2014 is the main central-level guide for policymakers on this matter; it refers to assessments of the impact on people’s fundamental rights, lives and livelihoods of planned environmental legislation.

In 2024, the ministry of corporate affairs introduced a policy for pre-legislative consultation to streamline the practice of public consultation for regulation across competition, bankruptcy and other regulators. In addition, some sector-specific regulators (telecom, securities, etc) have incorporated some RIA aspects, such as stakeholder engagement and some forms of cost-benefit analysis.

The need of the hour is to systemize such policy guidance and enact an omnibus law on generally applicable RIA principles and rules. This would give India a statutory RIA anchor, both nationally and sub-nationally.

However, this should not be seen as a reactive measure to developments in India’s external trade regimes. Rather, it should be viewed as a long overdue, proactive measure to advance good regulatory practice and ease the doing of business. A private member’s bill, The Legislative Impact Assessment Bill of 2024, was introduced in the upper house of Parliament last year. It shows that lawmakers recognize the need for a statutory basis for laying out procedures that evaluate the impact of legislation. The government must take note.

A central law on key RIA aspects has the potential to not only make legislation and rule-making in India more optimal, evidence-based, transparent and inclusive, but also demonstrate India’s commitment to its trade treaty obligations. It would be a step forward for India to reaffirm its commitment to the rule of law both domestically and internationally.

Advaiyot Sharma of CUTS contributed to this article.

The author is secretary general of CUTS International.