Regulatory Bodies

These are independent governmental bodies established by the government in order to set standards
in a specific field of activity, or operations and then to enforce those standards.
Regulatory agencies may or may not function outside direct executive supervision.

Role of Regulatory bodies

India liberalised industries in the 1990s and handed over sectoral governance to regulatory bodies.
These bodies played a constructive role in ensuring the free and fair market.
Post 1990, Privatisation saw the advent of the 'Indian Regulator' that became the 'nurturer' and
'parent' of its sector. The regulators incentivised private investment by giving them functional
autonomy and shielding them from interference.

Need for Regulation

 Prevention of Market Failure
Market failures occur in case of natural monopolies or asymmetric information, and in the
presence of externalities.
 To check anti-competitive practices
Such practices restrict competition and deteriorate consumer welfare by creating entry barriers
and price increases, that impedes to efficiency and innovation.
 To promote the public interest
Ensuring fair access, non-discrimination, affirmative action

Main functions of regulatory body

 Regulations and guides
 Review and assessment
 Licensing
 Inspection
 Corrective actions
 Enforcement

Types of Regulation in India

(i) Economic Regulation
(ii) Regulation in the Public Interest
(iii) Environmental Regulation

Benefits of Regulatory Bodies

 RBI’s tight monetary policy has enabled it to combat inflation
 Norms followed by RBI, SEBI, IRDAI pertaining to foreign investors prevented the ripples of the
global financial crisis from damaging the Indian economy.
 CCI has enabled in breaking the cartel of cement companies
 TRAI has helped in protecting customers from profit-driven mobile companies.
 Issues with Regulatory Bodies
1. Populist pressure
In India political populism often overtakes the economic agenda. This casts a shadow on regulation.
There are constant interferences in functioning of regulatory bodies by the ruling political parties.
For eg. - Interventions of government in the RBI functioning

2. Ineffective review system

The review mechanism of the functioning of the regulatory bodies under the aegis of parliamentary
committees is not very robust.

3. Selection of non-experts
Selection of non-experts to lead regulatory organizations may result in inefficiency in their operations.
For eg. - Former Finance Secretary was named Chairman of the Reserve Bank of India.

4. Regulatory authorities' recommendations are rarely followed through on.

5. No regular audit
Audit of regulatory bodies have never been prioritized by the government. As these bodies do not face
regular audit, they have involved into corruption. Example: Medical Council of India.

6. Financial problems
All the regulatory bodies are dependent on budgetary resources for their day to day functioning.
Government through the budgetary provisions interferes in the functioning of these bodies.

7. Overlapping of Powers
Presence of numerous regulatory organizations results in power overlapping.
Environment - CPCB & National NGT
Education - AICTE & UGC

Some Suggestion for Regulatory Bodies

1. Regulatory organisations should undertake a self-evaluation of themselves once in a few (say three)
years, and put out the conclusions in the public domain for informed discussion and debate.

2. Genuine functional autonomy would also have to be reinforced with financial autonomy by putting
in place a system where regulatory organisations are not dependent on government departments
for financial support.
3. Functional autonomy without corresponding accountability is a sure recipe for chaos. Thus, there is
a need to make sure such bodies imbibe the ethos of transparency and accountability in the
functioning of the bodies.
4. The appointment of persons to head regulatory organisations should be attempted in a far more
transparent manner.
5. Many countries have adopted techniques like “Regulatory Impact Assessments”. India can also
mandate such techniques through legislation and thereby preserve economic value.
REGULATORY BODIES IN INDIA
- Refer Current Affair & Read only those Regulatory Bodies which are in News .