Economic Survey 2014: Regulators should have limited powers to meet objectives

NEW DELHI: Calling for a re-examination of all laws that empower government to interfere in markets, the Economic Survey today 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," the government said.

As per the Economic Survey 2013-14 tabled in the Parliament today, 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," the survey noted.

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," it said.

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.