An insight on Regulation in India

Regulation means enforcement of law and ensuring conformity with the set of standards. The word Regula in Latin refers ‘to control’ or ‘to rule’. So, in other words, we can define Regulation as having a certain kind of control over anyone or anything.

After independence, India emerged as a welfare state. People started expecting many things from the state like protection from external threat, food security, employment generation and so on. At that time, state has the sole power to legislate, implement and also to regulate. So, there is no need for the regulatory bodies. 

Emergence of Regulatory bodies in India

In the 1990s LPG (Liberalization, Privatization, and Globalization) Reforms took place in India. Slowly, private players started doing business in almost all sectors except some sensitive sectors like defense, banking, railway, etc., There is a lot of chance to manipulate things. Then, regulation as well as regulatory bodies became the need of the hour.

Aims of Regulation

  • Public Interest
  • Quality of Services
  • Encouraging foreign investment
  • To expand economy
  • To promote a competitive environment

Characteristics of Regulatory bodies

  1. Regulatory bodies should be independent. 
  2. They must be established through an act of the legislature.
  3. The powers and functions of regulatory bodies are mentioned
  4. Regulatory bodies must be proactive
  5. They need the expertise to ensure efficiency
  6. Process of appointment, promotions must be transparent
  7. The operational autonomy is given to regulatory bodies.
  8. Regulating the regulatory bodies is also a mandatory exercise

Functions of Regulatory bodies:

  • Regulatory bodies act as the legislature, executive and judiciary. While instructing a rule, implementing a rule and imposing a penalty they become legislature, executive and judiciary respectively.
  • Regulatory bodies help in the right enforcement of the law. 
    • For example Pollution control board (PCB), it checks the pollution level of a vehicle and imposes penalty accordingly.
  • The expertise within the regulatory body assists in framing new policies.
    • For instance, RBI(Reserve Bank of India) gives inputs to the government to make policies, related to the national economy and finance sector.
  • Regulatory bodies play a facilitating role in public policymaking
  • They help to achieve transparency, efficiency in public policymaking as well as implementation
  • Regulatory bodies also bring the ground level implementation problems to the top of the table. So, that policy can be amended accordingly.

Issues with Indian regulatory system

  1. Regulatory capture: Regulatory bodies instead of condemning the corrupt officials, work in favour of them. This is considered as the major problem with Indian regulatory bodies.
  2. We do not have regulatory bodies established through an act of the legislature.
  3. They are accountable to legislators or bureaucrats rather than the legislature.
  4. There is no regulating mechanism on the regulatory bodies
  5. Lack of coordination and unified regulatory authority
    • Example: PNB case. Reserve Bank of India as a regulatory body, has many inspection teams to check corrupt practices. But, it failed to see the transaction pattern of Punjab National Bank, resulted in the biggest scam.
  6. Operational autonomy
    • According to the Administrative Reforms Commission (ARC), our regulatory bodies have less organizational autonomy
    • Roles and functions are not clearly defined
    • Specifications like tenure of office, qualification of appointment, Removal basis are not mentioned anywhere.
  7. Institutional capacity
    • Budget allocation is not satisfactory
    • Lack of expertise human resource
  8. Lack of respecting and encouraging talent at all levels 

Globally, the US Regulatory mechanism is treated as most efficient at the global level. Let us see some of the

Features of US Regulatory system

  1. US regulatory bodies are created by a statue passed by the US congress (like parliament in India)
  2. They are mandatory to report to the US congress, not to its president or any member.
  3. They are so autonomous and independent
  4. Although the members of regulatory bodies are appointed by the president, the power of removing them only rest with US congress
  5. Tenure of office is fixed
  6. They were given all three powers i.e., legislative, executive and judiciary.
  7. They follow the collegial system. So they decide by majority vote.


By seeing the above issues with the Indian regulatory bodies and comparing with the one of the efficient regulatory systems in world, we can say that our system should be reregulated to witness the desired changes. so, here are some of the measures to be taken

1 . Unified regulation

Regulation as a whole of a particular sector can be cost-effective.

 For instance, the finance sector in India itself having 6 regulatory bodies such as RBI, SEBI, Insurance Regulatory and Development Authority of India (IRDAI), Pension Funds Regulatory and Development Authority (PFRDA), Association of Mutual Funds in India (AMFI), Ministry of Corporate Affairs (MCA). Likewise, number of regulatory bodies are working in every sector which is leading to confusion and poor regulation. And now government slowly realizing this issue and taking measures to sort it out. One of the important developments in this area is that in 2019 cabinet approved the establishment of a unified authority for regulating all financial services in International Financial Services Centers (IFSCs) in India through the International Financial Services Centers Authority Bill, 2019

2. Restructuring regulatory bodies

Regulatory bodies should be restructured in such a way that transparency in appointments, fixed tenures, accountability are ensured. Second Administrative Reforms Commission also recommended to look up all the regulatory bodies, their roles and relation between the existing bodies.

3. Regulating regulatory bodies

Regulating the regulatory bodies is a very crucial aspect to see the effective functioning of regulatory bodies. Government should be proactive in evaluating the performance of regulatory bodies. Regulatory capture can also be avoided through this.

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