In the 1990s, India liberalised industries and delegated sectoral governance to regulatory agencies. These organisations contributed to ensure a free and fair market. Following privatisation in 1990, the ‘Indian Regulator’ emerged as the sector’s ‘nurturer’. Private investment was encouraged by authorities who gave it functional autonomy and shielded it from intervention.
The Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the National Bank for Agriculture and Rural Development (NABARD), the Small Industries Development Bank of India (SIDBI), the Food Safety and Standards Authority of India (FSSAI), the Central Drugs Standard Control Organisation (CDCSO), and the Competition Commission of India are some examples of regulatory bodies in India (CCI)
Importance of regulators
- Regulators occupy a centrestage in the institutional edifice of a nation.
- They carry out governance on behalf of the government in accordance with a statutory contract.
- There are significant advantages of governance through regulators.
Challenges faced by regulators
- Ineffective review system: Under the auspices of legislative committees, the review process for the operation of regulatory organisations is not very robust.
- Populist pressure: In India, political populism frequently takes precedence over economic concerns. This puts a pall on the rule of law. The dominant political parties are constantly interfering with the operation of regulatory authorities.
- Selection of non-experts to lead regulatory bodies: The appointment of non-experts to lead regulatory bodies may result in inefficiency in their operations. When the former Finance Secretary was named Chairman of the Reserve Bank of India, this issue arose.
Why periodic assessment
- The reformers have been paying attention to an objective, formal, and periodic performance review of regulators.
- In its 13th Report, the Second Administrative Reforms Commission (2009) advised that once every five years, a group of reputable professionals offer criteria for such examination.
- The regulators’ annual reports should include updates on pre-agreed evaluation parameters and be debated in Parliamentary Committees.
- The Damodaran Committee on Reforming the Regulatory Environment for Doing Business in India (2013) advised that each regulator conduct self-evaluation every three years and publish its findings for informed debate and discussion.
- Internationally, several frameworks are available for performance evaluation.
- The most prominent among them is probably OECD’s ‘Measuring Regulatory Performance’.
- Some jurisdictions have tailormade evaluation frameworks such as UK’s ‘Performance Measurement by Regulators’ and Australia’s ‘Regulator Performance Framework’.
- The evaluation may be supplemented with feedback from relevant stakeholders and a comparison with peer regulators nationally and internationally. It may end with identification of areas for improvement.
- A comprehensive review of India’s regulatory architecture is perhaps an imperative. Performance evaluation should be a key element of this review.
- The respective statutes should provide for an annual, internal and external evaluation of performance of the regulator, in relation to its objectives, resources, powers, and duties, and the nature of market it is responsible for.
- The regulator should facilitate such evaluation, particularly by generating relevant data and making it available. The results of the evaluation exercise should be disclosed.
How to structure:
- Give a brief intro about India’s regulators
- Discuss the need for regulators in an economy
- Explain why a periodic assessment of regulators is needed. Give examples from recent events
- Suggest measures in creating a strong assessment mechanism