Enforcement requires the State to find bad behaviour whereas incentives give people a reason to demonstrate good behaviour

Published on: Aug 28, 2026, 06:14:59 IST

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Have you noticed how a motorcyclist who always wears a helmet on the main road may sometimes ride without one on a quiet road inside your colony? He has not necessarily decided that a head injury is no longer dangerous but simply thinks that the chance of being stopped by a policeman is much smaller.

This is a basic problem with regulation. A rule backed only by the threat of punishment works only if people believe they will be caught. Where enforcement is infrequent, the rational response may be to ignore the rule if the cost of complying is greater than the perceived chance of being punished. This problem shows up in any attempt to regulate for health and safety. We tend to tell people what not to do and punish them when they are caught. But this approach doesn’t work when there is insufficient enforcement, a common problem in a country as large as India. The State has to find the people breaking the rules, which then requires inspectors, careful documentation of violations and imposition of penalties, while also contending with the possibility of bribery undermining the system. Can regulation be designed better so that people and businesses have a reason to do the right thing even when nobody is watching?

We have to step back to see that the basic purpose of regulation is not to produce compliance. Rather, it is to produce the outcome for which the regulation was created. When we see governments report thousands of inspections, fines and prosecutions and still have dangerous roads, polluted air or unsafe workplaces, it shows that the measures of regulatory activity are not a good proxy for regulatory success. Smart regulation requires a combination of sticks and carrots but, in India, we are far quicker to reach for the stick than the carrot. Carrots, though, have many advantages.

Take the case of road safety, a big issue in India, with over 170,000 road deaths each year, including over 35,000 pedestrians. The current approach is to use speed breakers everywhere, which slows down traffic for everyone — a cost that defeats the purpose of having good roads in the first place. Sweden has experimented with insurance discounts for drivers who demonstrate that they stay within speed limits, using electronic monitoring to verify their behaviour. Singapore combines penalties for traffic violations with rewards for drivers who maintain a clean record, including insurance discounts. The principle could be extended in India to provide lower insurance premiums to commercial fleets that can demonstrate sustained reductions in speeding, harsh braking and other risky driving could achieve outcomes much more easily than slowing down traffic.

The same approach could apply to businesses. In Germany, workplace-insurance systems reward employers with better safety records with lower premiums. This approach can be adopted in India, where factories that consistently demonstrate compliance with occupational-safety standards could similarly receive lower insurance costs and faster regulatory approvals. A point system, if you will, for good corporate behaviour, that is made public so that there are opportunities for public input. Instead of waiting for an inspector to discover a violation, the employer would have a financial reason to maintain and document a safe workplace.

Food safety offers another example. Instead of relying on periodic inspections to find unhygienic restaurants, establishments that maintain independently verified records of food-safety practices could receive a graded certification, displayed prominently for customers to see. This is fairly common in most US cities — one can see the restaurant’s safety rating even before entering the establishment. It is only if the restaurant is deemed unsafe that it is shut down. But a rating of C compared to an A rating is likely to discourage customers even without having to shut down the restaurant, which would then aspire to improve its rating. Basically, this incentive works because the restaurant has something to gain from maintaining standards even when an inspector is not present. And customers have information they can use when choosing where to eat.

Antibiotic resistance is a major problem — an estimated 297,000 annual deaths in India are directly attributable to bacterial antimicrobial resistance because pharmacies encourage the overuse and misuse of antibiotics, including for viral infections against which antibiotics have no effect. Pharmacies that maintain verifiable records of appropriate antibiotic dispensing could receive a recognised stewardship certification, while repeated inappropriate dispensing would attract penalties. Accredited pharmacies would then be allowed to dispense newer antibiotics because they have shown their reliability with existing ones.

There is another advantage to the carrot. Enforcement requires the State to find bad behaviour whereas incentives give people a reason to demonstrate good behaviour. With incentive-based regulation, a pharmacy seeking to be allowed to dispense newer antibiotics or a factory seeking a lower insurance premium would willingly provide information that documents their behaviour because they now have an incentive to do so. Regulation, therefore, becomes less a contest between an inspector and someone trying to evade the rules, and more a system in which evidence generation is encouraged. This is not to say that incentive-based systems cannot be gamed, but trying these out in some states to see how well they work compared to the current system is well worth the effort.

All this requires a fundamental mindset change in the bureaucracy from treating every citizen or business as a potential law-breaker to being a participant in a society looking to improve health and safety. When these outcomes are not being achieved, then it is time to rethink the laws rather than simply reaching for a bigger stick. We are also far too dependent on a competent officer being in the regulator’s seat in order for laws to be enforced. Sadly, that is not always the case.

A smarter regulatory system for health and safety would make good behaviour economically attractive, make that behaviour measurable, and reserve punishment for those who deliberately choose not to comply.

Ramanan Laxminarayan is president, One Health Trust. The views expressed are personal

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