Trust Spurs Investment, Akshay Jaitly On What India Needs Most

India’s path to becoming a developed economy will require more than just the quest for capital or big-ticket reforms. It will rest on something deeper and more enduring: trust in the rule of law, consistency in regulation, and strong and credible institutions.

In a wide-ranging conversation with Ranjana Chauhan, Akshay Jaitly, co-founder of leading law firm Trilegal and the legal-policy think tank TrustBridge, argues that India must “restrike the balance between governance and government” to unlock its next chapter of growth. That means moving away from a culture of suspicion and over-compliance towards one grounded in clarity, fairness, and trust.

“We need a government that steps back where it must, and steps up where it matters,” says Jaitly. “Too often, regulation in India stems from the belief that wrongdoing is the norm. That’s why our compliance system is heavy, risk-averse, and at times, innovation-stifling.” 

Here are edited excerpts from the interview:  
Q: You've had a unique vantage point—from building a top-tier law firm to working on systemic legal reform. When we talk about India's 2047 growth vision, what role do legal and institutional frameworks play in helping us get there?
A: Legal and institutional frameworks are absolutely key to how we build the structures that will take us to our future goals. People often refer to the "ease of doing business", but that phrase means different things to different people. What we should really be thinking about is how to clean the pipes; the broad pipes through which the economy runs. And the economy should run fundamentally on the rule of law.

That means predictability, fairness, and swift, equal enforcement of the law for every participant in the economy, not just making a few rules or processes easier for a particular sector.

Take infrastructure, for example. Creating a single-window clearance system may help. But a deeper and more important question is: why is investment not coming in the first place? We've seen significant infrastructure development over the past 15–20 years. So, the real issues are things like contract enforcement, the fair functioning of regulators, and confidence in the system overall.

Whether I’m acting as a lawyer for clients, Indian or foreign, or working as a researcher, those are the key risks we’re focused on. Why don’t regulators function as effectively as they could? Often the issues aren't superficial; they’re rooted in how institutions are structured and the incentives they operate under.

Q: Speaking of institutions, is the challenge today about the rules themselves, or the people and systems enforcing them?
A: Regulation is often a way to address specific challenges in a sector. That’s why we have specialised regulators, like SEBI in the capital markets. These institutions need to address technical issues while also upholding the principles of the rule of law.

The tricky part is ensuring that senior people in these institutions have both the technical understanding of the sector and the legal grounding to function fairly. They need to know how the sector works—market practices, norms, operations—and at the same time, apply the rule of law principles to their decisions.

Q: The finance minister recently called for more regulatory agility to attract investment. And also, we keep hearing terms like "regulatory cholesterol". Do you see these as a core challenge?
A: Those are two distinct but very real challenges. “Regulatory cholesterol”, a phrase Manish Sabharwal popularised, beautifully captures the problem. It refers to the layers of regulation and compliance burden placed on Indian businesses.

When we think of an Indian company, we often imagine a large listed entity. But Indian businesses also include small publishing houses, restaurants, and manufacturing units. It’s these smaller businesses that suffer the most from this regulatory clutter; they often don’t have the time, money, or capacity to comply.

Many of these regulations were created during a more controlled, socialist economic phase. And we haven't fully unwound them. Plus, small businesses were rarely considered when those laws were designed.

On the other hand, "regulatory agility" is about how responsive regulators are within the given legal architecture. A big issue here is understaffing. Even critical regulatory bodies often lack appointed members. And beneath those members, the general public doesn't see the real gap: the lack of qualified staff to support them.

You can’t expect two or three people to issue informed decisions without proper analytical and administrative support. So yes, we need less regulation, aimed specifically at solving clear market failures. And simultaneously, we need stronger, better-staffed, better-resourced regulators to implement what remains.

Q: We rightly place the burden of reform on government. But what about businesses themselves? What does responsible corporate behaviour look like, especially when it comes to climate action or ethical conduct?
A: That’s a valid question, but it’s also a chicken-and-egg situation. Because of the heavy regulatory burden and the discretion the state has, only some businesses are able to navigate the ambiguity.

If there were more predictability and less ambiguity, I believe you’d see more ethical behaviour. If a business owner was confident that following the law would protect them from harassment, they’d be more inclined to comply fully.

There’s a famous example, still relevant, I think. It’s about a restaurant in Mumbai. Excise law requires just one entrance to control alcohol movement. Fire safety law requires at least two. So, the restaurant is in violation of one law no matter what.

That kind of contradiction creates space for arbitrary enforcement. And there are thousands of such examples across India’s legal landscape. A study by ORF found over 26,000 provisions under which a businessperson or executive could be jailed. Some people can handle that risk. Many simply don’t want to. So, you have hundreds of thousands of would-be entrepreneurs across India who stay out of business because the compliance risk is too high.

Q: Moving to the critical issue of climate and energy transition, how do legal and regulatory frameworks support or hinder India’s shift?
A: There are two broad principles the government could follow to support the energy transition. First, create the right incentives for people to “do the right thing”. Second, get out of the way where possible.

As in any sector, regulation should focus on market failures. For instance, electricity is inherently monopolistic. So, regulators must protect consumers from dominant players. That’s a fair role for regulation.

But we also have too much control over simple transactions. For example: if you install a solar panel on your roof, generate extra power, and I, your neighbour, want to buy that power from you, why should anyone interfere, provided safety standards are followed?

This is a willing buyer and willing seller. Regulation should enable these transactions, not restrict them. Instead, it should target real risks: monopolistic behaviour, safety lapses, or grid stability.

That’s the right approach: identify the few serious market failures, build a capable regulator to deal with those, and otherwise let people engage freely. Some sectors may need additional incentives at the start, but overall, it’s basic regulatory economics - intervene only where there's clear failure.

Q: Looking at India’s broader challenges, what should be the top priorities for policymakers, businesses, and citizens over the next decade?
A: That’s a big question. But I’d say the first thing we must acknowledge is that India has enormous potential. I remember The Economist’s Millennium Edition in 2000. On India, it said: “Indians do better than India.” That line stuck with me.

We are clever, resourceful, and used to frugal innovation. But we haven’t created a system that unlocks this potential fully.

To be fair, the Prime Minister once spoke of “minimum government, maximum governance.” I think we've focused more on the governance part--enforcement, compliance, tackling corruption--which is good. But we’ve overlooked the minimum government part.

That’s what needs attention. Often, the state functions from a place of suspicion. The reflex is: someone must be doing something wrong; let’s create rules to stop them.

This creates a legal structure with heavy entry barriers and compliance burdens. Instead, we should allow maximum freedom, backed by a short list of meaningful rules that are strictly and credibly enforced.

We don’t have the institutional capacity to enforce the thousands of laws already on the books. So what happens? People break laws, expecting to manage the consequences later. If we had fewer laws enforced properly, we’d see better behaviour from the private sector and stronger governance outcomes.

That’s the real reset we need: a mindset shift, not just at the top, but across all levels of government, including the states.

Watch the full interview