This Article is From Jul 09, 2014

Regulators Should Have Limited Powers: Economic Survey

New Delhi: Calling for a re-examination of all laws that empower government to interfere in markets, a government document has said regulators should be given only "limited powers".

"The biggest challenge today is improving state capacity suitable for a market-based economy. A long term, careful and systematic effort is required for undertaking institutional change," said the Economic Survey 2013-14, tabled in Parliament by Finance Minister Arun Jaitley on Wednesday.

As per the survey, in 1960s and 1970s, a series of laws were enacted that increased the role of government in the functioning of both product and factor markets.

"...Today, the situation is one of an awkward juxtaposition of over-intervention in some respects and inadequate state participation in others," it noted.

Stating that the agenda of removing inappropriate government interventions is far from complete, the government said it was also important to also focus on the second generation of reforms.

"There is need to re-examine all laws that empower the government to interfere in markets... Laws need to clearly define the objectives of regulation and give limited powers to regulators to meet those objectives."

Noting that vaguely posed objectives lead to loss of accountability, the survey said that once a clear objective is defined, laws should give the agency the minimum possible coercive power to achieve the same.

"If expansive powers are given, there is greater risk of abuse of power."

According to the survey, India needs greater expertise for establishing intelligent, efficient, cost-minimising government organisations that successfully address market failures while avoiding the perils of central planning.

"A body of knowledge is now needed in India on how to construct laws, agency architecture, organisation structure, process manuals and human resources through which an effective state appropriate for the present can be obtained," it added.

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