Kerala, over the past few years, has undertaken various measures to improve its business ecosystem. The government has initiated improvements through legislative modifications, as seen in  the Kerala Investment Promotion Facilitation Act, 2018, amending seven State Acts. Moreover, the enactment of the Kerala Micro Small and Medium Enterprises Facilitation Act, 2019, aims to streamline processes for MSMEs by granting exemptions from certain approvals and inspections. 

While these initiatives highlight progress, there remains a pressing need to amend, reform and repeal certain state-level regulations to further enhance Kerala’s business climate. One of the major challenges that entrepreneurs face on a day to day basis is navigating through various compliances with the regulations imposed. For a business to operate smoothly, it will have to comply with the state laws along with the central laws. Among the laws being followed in the state of Kerala, there are nearly 130 plus state laws that affect businesses directly or indirectly, of which 75 have imprisonment clauses. In numerous instances, penalties are disproportionately severe, with some laws criminalising procedural violations and penalising inadvertent or minor errors rather than intentional acts of harm, fraud, or evasion. 

When examining state-level regulations, it becomes evident that a significant portion of provisions carrying imprisonment penalties affecting business entities are found within labour-related laws. The Kerala Headload Workers Act, 1978; The Kerala Agricultural Workers Act, 1974; The Kerala Beedi And Cigar Industrial Premises (Regulation Of Conditions Of Work) Act, 1961; and the  Industrial Establishments (National and Festival Holidays) Act, 1958—all of them carry imprisonment clauses for procedural violations like obstructing any inspector or refusing to produce on the demand of an inspector, any register or any other document. 

Similar concerns persist in the Welfare Funds Acts, with a total of nineteen Welfare Acts including provisions for imprisonment for not complying with any of the provisions of the Act. The primary compliance requirement of each Welfare Fund Act is a monthly contribution to the welfare fund by the employer. While it is understandable that the government prioritises the welfare of employees, any lapses in payment should not unjustly penalise the employer.

These irrational punishments in the state business laws necessitate decriminalisation. The term “decriminalisation” typically denotes the removal of a specific offence from the scope of the criminal justice system due to the belief that certain actions do not warrant punishment. This term can be understood in at least two ways. In a narrower sense, decriminalisation involves removing a particular behaviour from the list of punishable offences, thereby altering the substantive criminal law. In a broader sense, decriminalisation encompasses various measures that, while keeping certain behaviours as offences, reduce or mitigate the severity of punishment through procedural or correctional means. The process of decriminalisation challenges the criminal assumptions behind such laws. Certain conduct may be decriminalised as the use of criminal penalties, such as imprisonment and death, starts to seem out of place or excessive in relation to that conduct.

Decriminalisation of laws has been in the discussion in the Indian economy for a while. It gained wider prominence with the passing of the Janvishwas Act, 2023 (an Act to amend certain enactments for decriminalising and rationalising offences to further enhance trust-based governance for ease of living and doing business). Under the Janvishwas Act, for instance, in the Industries (Development and Regulation) Act, 1951, imprisonment and fine provisions under Section 24 relating to registration and licence of industrial undertakings, licences for producing and manufacturing new articles, etc. are replaced with penalties. Similarly, the Pharmacy Act, 1948, Sub-section (3) of Section 26A, which prescribes imprisonment and a fine for obstructing an inspector from his duty,  is replaced with an enhanced financial penalty. 

Similar amendments to that of the Janvishwas Act can be adopted in state laws. Beyond decriminalisation, there should also be deliberate efforts to repeal redundant provisions. Certain sections of existing laws can be completely repealed, such as the Kerala Buildings (Lease and Rent Control) Act, 1965, which mandates notification of vacant buildings to the accommodation controller. 

To initiate the decriminalisation process effectively, it is imperative for the state to proactively collaborate with stakeholders to grasp the practical hurdles of adhering to existing laws. Comprehensive scrutiny of each law and its provisions is necessary to identify outdated ones for elimination; amendments to penalties, particularly imprisonment for minor offences, should be reconsidered. Ultimately, the focus should be on fostering an ecosystem within the state that mirrors the overarching goal of boosting growth and productivity.


(This article is first published on Kerala Management Association Bussines Magazine)

This article is authored by Anu Anna Jo, senior associate, research, Centre for Public Policy Research

Views expressed by the author are personal and need not reflect or represent the views of the Centre for Public Policy Research.

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Anu Anna Jo is a Senior Associate, Research at CPPR. Anu, by qualification holds an M.sc. in Economics (specialised in Environmental Economics) from Madras School of Economics and B.A. Honors Economics from Jesus and Mary College, Delhi University. She has been associated with Madras School of Economics as a Research Assistant since 2018 on various projects. She has also interned with Dept. of Economic Affairs, Ministry of Finance, Government of India in 2014.

Anu anna Jo
Anu anna Jo
Anu Anna Jo is a Senior Associate, Research at CPPR. Anu, by qualification holds an M.sc. in Economics (specialised in Environmental Economics) from Madras School of Economics and B.A. Honors Economics from Jesus and Mary College, Delhi University. She has been associated with Madras School of Economics as a Research Assistant since 2018 on various projects. She has also interned with Dept. of Economic Affairs, Ministry of Finance, Government of India in 2014.

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