Make it a flat world

 

 

Imagine a football or a cricket match without a referee or an umpire. There would be mayhem and even possibly unfair means on the ground. In India, the story of regulation is somewhat similar. The loser has been the Indian consumer. Yet, effective regulation remains one of the most critical aspects of good governance in a rapidly growing and globalising economy. Effective regulation is the only way that a non-intrusive Central government can ensure that the consumer doesn’t end up getting a raw deal.

It is a fine balance that the State must maintain between the two extremes of being too restrictive and giving a free rein to ‘animal instincts’ of entrepreneurs. Education and aviation are two sectors where you can see this paradoxical attitude of the Centre. In the market for education (arguably the most important market), the Centre has institutions like the UGC (University Grants Commission) and the All India Council of Technical Education that act as regulators. Both have been unduly intrusive, and closed to the changes in the global economy.

Both have tedious and archaic rules for organisations offering higher education to Indian students. Genuine and world-class institutions refuse to be mired in the red tape while fly-by-night operators get away by running ‘cottage’ institutes where quality education is the last priority. The other extreme is the aviation sector where new airlines are sprouting like wild mushrooms. Unbridled growth and an unwillingness to enforce rules results in chaotic scenes in Indian airports.

So how can regulation be used as an effective tool? The first task is to set up effective and fair regulatory bodies who make the rules and enforce them. Look at how the Insurance Regulatory and Development Authority (IRDA) has quietly gone about the task. Rivals have accepted that IRDA is a fair referee and have gone about expanding their business at a blistering pace. Insurance penetration has gone up during the short IRDA regime from 2% to almost 20%.

Next is to give teeth to the regulator, who at the Central level is more about vision than just the nitty gritty. For example, SEZs. Then, the regulators must be made autonomous. The Election Commission is the best example. All this would be a way of delivering good governance through effective regulation.