Regulatory institutions in India are still a “work in progress”, and they have not attained the kind of maturity that is needed for the emerging economy. Comment. (250 Words)

Mentors Comment:
It’s a straightforward question. In the discussion, you have to discuss the regulatory framework in India. Regulatory bodies are important because substantial power to make laws has shifted from elected representatives to technocrats sitting in regulatory bodies.

In the intro give the present scenario of regulatory bodies in India. Highlight their functioning.
In the next discussion, explain what ails the regulatory bodies in India and their downsides. Lack of capacity to handle such a large market, politicization, incompetent members who are placed there for their political patronage, non-implementation of their reports and suggestions, resorting to banning and restriction in every tough situation, increased litigation, and appeals, etc. are some of the points to ponder upon.

Next, provide steps to improve this situation. Capacity building, appointments of experts of the field in their respective bodies, better crisis management, quick decision making, etc. are some important points.

Answer:

The number of regulatory bodies in India has increased greatly after the economic liberalization of 1991 when the government gradually transformed itself from player to umpire. Today, we’ve independent regulators for most of the areas of business, economy, higher education or healthcare. 

Regulatory framework in India:

  • Over a period of time, a number of regulatory bodies, ranging from RBI, SEBI, IRDA, PFRDA to TRAI, CCI, UGC, FSSAI, MCI etc have been set up in India.
  • These regulators have been empowered to set the policy agenda, outline regulations, punish non-compliance and garner resources to manage their affairs.
  • The policy direction pursued by every regulator has to support the development of the market of the allocated jurisdiction.
  • However, in Indian democracy, social and political populism has proven to often overtake the economic agenda.

Issues with Regulatory authorities in India:

  • The issue of multiple regulatory bodies with overlapping jurisdiction is major cause of governance deficit in India.
  • Lack of clarity leads to politicization of institutions.
  • Capacity is still a real problem. Most of the institutions lack the capacity to look after their respective sectors alone in the present capacity they have.
  • Capacity is needed to understand how to use data better and draw upon best practices internationally.
  • India’s economic and political system has still not developed the maturity to have finely calibrated interventions for the country’s problems. It reflects on the working of these institutions.
  • Whenever faced with impropriety in their respective sectors, regulators have recoursed to blunt instruments like bans and restrictions.
  • Duplication of funds, functions and functionaries along with Lack of accountability goes against the maxim of “minimum government and maximum governance”.
  • While regulators enjoy functional independence, they still fall within the broad domain of the executive branch of the state, which makes them susceptible to the pressure groups and corporate lobbying.
  • Recommendations made by Regulatory Authorities are rarely implemented.
  • Regulatory hurdles choking growth of economy.

Steps needed to improve the functioning of regulatory institutions:

  • We need more and more talent and build capacity in our regulatory institutions
  • In the area of competition policy, we need to have nuanced analysis and nuanced interventions wherever problems arise. Ban and restrictions are not going to work.
  • All regulatory institutions should be independent, and free from political interference
  • There is need to find ways to taking decisions and implementing them expeditiously given that the we are getting more cases in these domains.
  • Trade policy and competition policy are complementary. Trade policy is one of the best ways to ensure competition in the tradable goods sector.
  • Government should consider recommendations of Punchhi commission and Srikrishna panel regarding an independent regulator overseeing all regulators.

Some regulators have achieved useful outcomes. However, the creation of independent sectoral regulators in India has not been accompanied by critical reflection on their role, or attention to the political, legal, and institutional contexts within which they operate. The existing mechanisms of legislative oversight over regulators’ performance need to be strengthened considerably to be more effective. The centrality of legislative oversight comes from the design of regulators.

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