Regulatory emergency

Why India must act to improve its regulators

The Food Safety and Standards Authority of India, or FSSAI, which is India’s apex food safety regulator, has not covered itself with glory of late. Its order to withdraw Nestle’s Maggi noodles from India’s grocery shelves has come under a cloud for several reasons. There is little doubt that Nestle deserves to be criticised for the manner in which it chose to handle the situation. But it now appears that the company had already decided to recall Maggi, and this spurred the FSSAI to action before additional reports had come in. The regulator has thus given the impression of acting in a bid to send out a message about its strictness rather than due consideration.

Worse, Maggi noodles have now been cleared not just by laboratories in Singapore and Britain but also by FSSAI- approved domestic laboratories. This imbroglio is the climax of a period in which the FSSAI has gone after various puzzling but headline- grabbing targets — such as the world- famous Australian wine brand, Jacob’s Creek, for supposedly including tartaric acid, which gained the regulator an acid reproof from the Bombay High Court for an “ adversarial” attitude. “ Statutory authorities”, added the Court while overruling the FSSAI in this case, must “ act in a manner that is fair, transparent and with a proper application of mind”. Certainly, these strictures appear deserved in the case of the FSSAI.

But the Court’s opinion sadly extends to many other regulators. India’s pharmaceutical regulator is a case in point. Following several controversial reports about lax standards in Indian companies – several of which wound up being banned from developed- country markets – the drug controller simply said, in effect, that American standards could not be applied to Indian pharma, because no drug would then get passed. The automobile sector is no better; Europe’s regulators tested five new Indian small cars in 2014 and found none met safety standards. But that doesn’t matter for regulation back home. Then there’s aviation; India may be one of the world’s largest and fastest- growing airline markets, but the US Federal Aviation Authority in 2014 downgraded safety standards to its equivalent of junk status — because, the FAA said, the Indian aviation regulator didn’t have enough people to inspect all the planes they were supposed to. This is an emergency — a public health, public safety, and economic emergency.

India is the third- largest economy in the world ( measured by its gross domestic product in terms of purchasing power parity), but it has one of the most tattered regulatory structures globally. It has laws that are so strict on paper that they become unmanageable. Then there is the problem of unconscionably lax application of these laws, which leads to Maggi- style discretion and controversy. Worse, fixing this does not appear to be on the government or business agenda. Instead, both the Centre and India Inc defend India’s lax regulation. Acting on pressure from domestic companies, India did not even participate in negotiations for the second- generation Information Technology Agreement, or ITA- II, for fear that freer trade would hurt. It insists on data- secure status in Europe for Indian companies without legislating basic privacy rights at home. This reveals a short- sighted lack of ambition in the Indian private sector; unless they push for updated regulation, they will never grow and become global giants. And the government must think of consumers — who have the right to global standards, to Maggi and to safer cars.