Regulatory Management and Reform in India

Siddhartha Mitra and Vijay Vir Singh

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Regulation: Definitions

• Controlling human or societal behaviour by rules

• Alternatively a rule or order issued by an executive authority or regulatory agency having the force of law

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Regulation: Theories • ‘Public interest’ school

• Checks market failure, anti-competitive practices and promotes public interest

• Augments stakeholder welfare

• ‘Capture’ school • Net outcome of powerful vested interests

• Applicability of the two theories would depend on • Strength of institutions

• Spread of power across interest groups

• Both schools are relevant for Indian experience • Multiplicity of lobbies and heterogeneous stakeholder community

• Increasing private presence and co-existence with public firms

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Typology of Regulation in India

• One possible typology: economic regulation, regulation in public interest, environmental regulation

• Business regulation and sector regulation

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Changes in Business Regulation

• Industrial licensing requirements mostly eliminated • Areas reserved for public sector opened to private sector

participation• Tax rates rationalised and tax laws simplified• Double tax avoidance agreement with various countries• Incentives provided for new investments in infrastructure,

power distribution, industrial parks or special economic zones (SEZ) etc

• Foreign exchange controls liberalised• Liberalisation of approvals needed from state

governments but actual implementation dogged by bureaucratic inefficiency

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Changes in Sector Regulation

• Private entry/participation in many sectors has led to need for regulation to promote /simulate competition

• Specialised regulatory agencies in telecom, electricity etc have been established replacing regulation by line ministries

• Establishment of specialised regulators has often not resulted in the expected regulatory independence

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Drivers of Regulatory Change

Who? • Political leadership: relevant ministers and ministries, leaders

of opposition parties• Planning Commission • Chambers of commerce and civil society

Priorities for change• Improvement in the quality of government-business interface • Reduction in bureaucratisation • Reduction in procedures and time required for starting a

business

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Important Regulatory Areas Needing Intervention

• Delineation and better coordination between regulation and policy

• Consultation with stakeholders• Better coordination and cooperation between

competition authority and sector regulators • Better regulation of product quality • Improvements in redressal for consumers and

other stakeholders

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Important Regulatory Areas Needing Intervention

• Inventorisation of licenses and regulations • Better implementation of single window systems• Regulatory coherence

» Common competition law binding all sectors of the economy already exists and has to be enforced

» Planning Commission’s approach paper for enhancement of such coherence and standardisation of the operation of sector regulators would need implementation

• Financial and administrative autonomy of regulators • Enhancement of accountability of regulators • Assessment of quality of regulation through methods such as

Regulatory Impact Analysis and Consumer Impact Assessment

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