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| So it should not come as a surprise to anyone that successive governments since 1991, when India decided to embrace markets, have succeeded in converting an idea (regulatory institutions) that is meant to help the marketplace function better into a practice that gets in their way as effectively as the old babudom did. It is a special gift that Indian governments have, perhaps the only one. |
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| In part, the irrepressible desire in bureaucratic hearts to be where the action is, even after retirement, is to blame. The urge for meddlesome public service dies hard in some. But mostly, though, it is because our governments have been putting the cart before the horse. |
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| For instance, a necessary condition for a market regulator to exist is that there must be a market. But often, we have put into a place a regulator before the market in that industry develops. This has been done on the plausible plea that when a monopoly is dismantled to make way for a competitive market, a regulator will ensure that the process is smooth and efficient. |
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| The results, needless to say, in business after business, have been quite the opposite. A market has of course developed, but neither smoothly, nor in a manner that is conducive to efficiency. The telecoms market is the most visible example of this. |
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| The sins of omission and commission in the insurance market have not yet come to light but they will once the industry gathers some momentum. The efforts to regulate the market for electricity fall into the same category, as do the ones in respect of ports, airports, banks, the stock market and so on. The list is long. |
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| When confronted with this, the usual responses of the regulator are the deeply philosophical Vedic questions: what is efficiency? Who knows what smooth is? |
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| The universally accepted answer that efficiency means healthy competition via a competitive and non-collusive market structure, which eventually leads to lower costs, prices, consumption of capital per unit of output, transactions costs and satisfied customers etc cuts little ice. |
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| Instead of being a cooperative endeavour, market regulation in India has become a confrontation between the regulator and the regulated. In that sense, the new regulators have merely replaced the old ministries. |
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This need not be so. For one thing, there is no need to appoint superannuated civil servants with their
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