What is the issue?
- Transparent regulators are a must for evolution of mature markets.
- In India, political considerations have time and again forced distortions in regulatory frameworks.
What is a Regulatory Regime?
- Liberalisation of economies and unleashing of market forces gives birth to regulators and regulatory regimes.
- Economists described this as the transition of a government’s role from positive intervention to arm’s length superintendence.
- But the manner in which the regulatory system has been established and ‘Regulatory obstructionism’ to development of businesses is a debatable issue.
- Lack of transparency and accountability of the regulators in India has been flagged by many economic observers.
Currently how deos the regulatory framework in India look?
- Over a period of time, a number of regulatory bodies, ranging from RBI, SEBI, IRDA, PFRDA to TRAI, electricity regulators, CCI, FDA have been set up in India.
- There is a proposal to create a regulator for the aviation and rail traffic business as well and many more may follow.
- 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.
What are the issues concerning regulatory sector?
- Politicisation - As economic agents inherently intend to maximise profits, market misconduct happens in every domain.
- Whenever such incidences occur, they have to be dealt with pragmatically but due to political pressures, policy makers go overdrive and frame restrictive policies and denounce regulators.
- The politicisation of such events has made the regulators in India overcautious & frightened in order to dodge any blame game.
- Performance - In many cases, non-experts are selected to lead the regulatory bodies thereby affecting technical aspects.
- Second, the review mechanism for the functioning of the regulatory bodies is not very robust.
- In particular, it does not include the role of regulators in the development of the market.
- Upgrading - The inventions and innovations in the sector and the society at large influence the direction of the market.
- Hence, regulatory mechanisms need to update in consonance with the above mentioned changes without much delay.
- If these issues aren’t addressed, the development of the mature and well regulated markets will take a serious beating.
What are the larger questions doing the rounds?
- A regulatory state was conceived as a fast and flexible alternative to the cumbersome and bureaucratic frames of the replaced era.
- However, questions about the democratic governance and accountability of regulators are being raised around the world.
- This is because substantial power to make laws has shifted from elected representatives to technocrats sitting in regulatory bodies.
- The Government should consider appointing a high-level task force immediately to delve deep into these issues.
Source: Businessline
