India needs a transparent rulebook for the business of influence

When it comes to public policy, the Street proposes, but often the Lobby disposes. Businesses lobby regulators, industry associations lobby ministries, technology companies lobby for market access, and foreign corporations lobby through trade negotiations.

In a democracy, much of this is legitimate. Elected politicians and policymakers need to hear from those who understand consequences of laws and regulations. Yet, India has never created a transparent institutional framework in which the public can see who is seeking influence, on whose behalf, with what resources and for what policy outcome. Markets often know, or speculate, who is lobbying for a rule change and which companies stand to benefit. But informed market intelligence is no substitute for accountable public record.

The recent debate over merchant discount rate (MDR) on UPI is a useful test of this gap. India has moved towards allowing MDR on selected digital payment transactions, while US Trade Representative (USTR) has criticised India’s digital payments framework, including UPI and RuPay, as a barrier affecting American payment companies. The issue now sits within wider India-US negotiations where digital trade and market access have acquired geopolitical weight.

There could be sound domestic economic reasons for MDR. But companies entered this market when they knew about the consequences of zero MDR, and still chose to build scale. Seeking a change in the economics post the build-out, with the state being asked to support the resulting business model, raises a harder question of regulatory capture.

The irony is that banks remain central to the consumer relationship and transaction architecture, carrying technology, compliance and risk burden, even though many lack the risk appetite and did not commit the capital to fund the resilience systems that a nationally critical payments network demands. If MDR is to make UPI sustainable, policy must be clear about who should pay for resilience, who should earn from the payment rail, and who should bear the risk when it fails.

The distributional effect of the policy, hence, must be widely debated as it would inevitably create winners and losers. Which is why India needs a Regulatory Advocacy and Market Access Act (RAMA).

Lobbying should have a legal blessing, with disclosure rather than prohibition. RAMA should cover advocacy undertaken by companies, consultants, industry associations, law firms and other professional advisers, as well as foreign principals and former bureaucrats, regulators, politicians and politically exposed persons. It should disclose who is represented, what regulatory or market-access outcome is sought, material expenditure and all engagements with public officials.

Foreign principals and former public officials should face enhanced disclosure and cooling-off requirements, with penalties for false declarations. A searchable, current public registry would allow policymakers, Parliament, investors and citizens to distinguish evidence from advocacy, and domestic interests from foreign commercial ones.

There is a deeper economic reason. Government makes policy under conditions of incomplete information. Industry often possesses technical knowledge that the state needs but also has a commercial incentive to present that knowledge selectively, fusing information and influence operation into a seamless whole. Consumer interests, however, are more diffuse and harder to organise.

Lobbying can correct the state’s information deficit. But where business and political interests intersect, access itself becomes an economic asset, giving organised interests disproportionate influence over policy. This is a political economy problem, not merely an ethical one. India’s discomfort with that nexus has deep roots. The ‘Radia tapes’ reinforced the public association between corporate access, political networks and influence-peddling. But the absence of a formal lobbying framework did little to make lobbying disappear.

The old ‘government affairs’ department in corporate circles has now acquired the more respectable title of ‘public policy’, while lobbying increasingly arrives as paid astroturf campaigns, strategic advisory or even legal representation. A company making a regulatory submission, an industry association shaping a policy position or a law firm advising on the desired regulatory outcome may all be engaged in legitimate advocacy. One is left wondering whose affairs, and which ‘public’, are being represented.

The US offers two useful reference points, without being a model India should copy. Foreign Agents Registration Act (FARA) requires disclosure by agents acting for foreign principals in specified political activities, while the US also has a broader lobbying disclosure regime. The principle is straightforward: influence over public policy should leave a record that can be examined.

The MDR debate also shows why the identity of lobbyists matters. Public discussion has focused naturally on PhonePe, Google Pay and other payment platforms because they dominate UPI usage. But the economics of the payment chain extend well beyond the apps on a consumer’s phone.

Banks provide the underlying accounts and transaction infrastructure, and carry substantial technology, compliance, security and operational responsibilities. Merchants want low transaction costs, consumers want free payments, payment service providers need sustainable economics, while global payment companies have their own interests in market access and competitive neutrality. These are distinct interests and should not disappear into the convenient label of ‘payments industry’.

A well-regulated marketplace would have credible regulatory institutions. But credibility requires oversight of the regulatory gods of the marketplace and scrutiny of the interests that influence their actions. RAMA would go a long way towards providing that oversight by making the marketplace for influence transparent.