Macro/Finance Group, NIPFP

Building State capacity for regulation in India

Shubho Roy, Ajay Shah, B. N. Srikrishna and Somasekhar Sundaresan. Building State capacity for regulation in India in Regulation in India: Design, Capacity, Performance edited by Devesh Kapur and Madhav Khosla. Oxford: Hart Publishing, April 2019.

The economic reforms in India envision shifting from regulation of markets being run by departments of government, to oversight by specialised regulators. While many regulators have been created in recent decades, the outcomes have often been disappointing. In this paper, we analyse the features of organisation design that cater to high performance regulators. We propose sound designs for: clarity of purpose, the board, the legislative process, the executive process, the judicial process, and reporting. We argue that when these features are mandated by legislation that creates the regulator, feedback loops will be established through which State capacity will be gradually obtained.