2.1. Evolution of Regulation in India

The regulatory mechanism in India can broadly be divided into two phases. The first phase spanned from independence (1947) to liberalization reforms (1991). The second phase starts after economic reforms of 1991.

Post-independence, India experimented with a “socialist mixed economy model" with the state retaining dominant control over the economy. . While private sector activity was allowed, the government controlled it through licensing and quotas in regard to intermediate goods, imports and outputs. Such controls were complemented by high tariff as well. Thus, the government was not only a producer and regulator of strategic and important goods and services, it also exerted direct control over the output of private sector activity. Since electoral consideration affected regulatory actions by the government, such regulation can hardly be labeled as “independent”.

After 1985, the Indian economy embarked on a process of domestic reform, which included– delicensing of industries and abolition of output quotas, permission for private entry into sectors, which were hitherto the monopoly of the government, and liberalization of quotas and tariffs on capital good imports.

From 1991 onwards, liberalization of the external sector meant that tariff reductions were extended to almost the entire spectrum of merchandise trade and conditions for foreign investment were simplified and liberalized.

The process of domestic reform and external liberalization is still ongoing. However, the producer profile in various sectors has undergone a significant change with private firms co- existing with government firms in many sectors, which were previously government monopolies (e.g. electricity, telecommunications).

The consensus among decision makers has been that independent regulation is required in such sectors to guarantee a level playing field. As a result, independent regulators have been constituted in various sectors.

The government in India, since 1991, has set up a number of independent regulatory authorities to prevent monopolies, permit network industries in a number of real (non- financial) sectors, and govern the financial sector (banking, insurance, capital markets and derivatives).

Independent authorities smoothens the functioning of a complex, modern economy, upholds the wider public interests and protects public commons.