DEREGULATION COMMISSION: ECONOMY

DEREGULATION COMMISSION: ECONOMY

NEWS: Govt to set up deregulation commission to further reduce State's role in governance: PM Modi

 

WHAT’S IN THE NEWS?

The Prime Minister announced the Deregulation Commission to simplify regulations, reduce bureaucratic red tape, and enhance economic growth by working with regulatory bodies. The initiative aims to support businesses, attract foreign investment, and modernize outdated laws while ensuring fair competition and consumer protection.

 

Deregulation Commission: A Move Towards Economic Reform

Understanding Deregulation and Its Need in India

  • Deregulation involves reducing or eliminating government-imposed restrictions on industries to enhance market efficiency.
  • India faces bureaucratic red tape, excessive licensing, and sectoral restrictions, which hinder business growth, especially for startups and MSMEs.

 

Key Highlights of the Announcement

  • The Prime Minister announced the establishment of a Deregulation Commission to simplify regulations and reduce government interference.
  • Part of the Jan Vishwas 2.0 initiative, aiming to eliminate outdated compliances.
  • Focuses on sectors like banking, energy, telecom, retail, and manufacturing.
  • Will collaborate with regulatory bodies like RBI, SEBI, TRAI, and CERC to streamline regulations.

 

Objectives of the Deregulation Commission

  • Reduce bureaucratic red tape by simplifying approval processes and eliminating redundant laws.
  • Enhance economic growth by ensuring faster clearances in manufacturing, infrastructure, and digital sectors.
  • Support startups and MSMEs by reducing regulatory bottlenecks like multiple approvals and high tax burdens.
  • Modernize outdated laws by recommending amendments to colonial-era regulations.
  • Attract more foreign direct investment (FDI) by easing restrictions in retail, insurance, and e-commerce sectors.
  • Strengthen federalism by working with states to create uniform business policies.
  • Increase competition and improve consumer services through private sector efficiency.

 

Evolution of Deregulation in India

  • Economic liberalization in the 1990s reduced state control and encouraged foreign direct investment (FDI).
  • Key sectors like telecom, energy, and oil & gas underwent deregulation to enhance private sector participation.

 

Regulatory Commissions Overseeing Deregulation

Regulatory Commission

Sector

Role

Key Deregulation Steps

RBI

Banking & Finance

Monitors monetary policy

Increased FDI limits, deregulated interest rates

TRAI

Telecommunications

Ensures fair competition

Allowed private players, introduced revenue-sharing model

CERC

Energy

Manages electricity tariffs

Increased private power investment, renewable energy promotion

PNGRB

Oil & Gas

Regulates petroleum pricing

Deregulated petrol and diesel prices, introduced daily fuel price revisions

 

Challenges and Negative Impact of Deregulation

  • Market failures due to unchecked deregulation, leading to monopolies and financial crises.
  • Job losses in public sector enterprises following privatization.
  • Risk of regulatory capture, where private entities influence policies in their favor.
  • Rural disparities as economic benefits are not evenly distributed across urban and rural areas.
  • Environmental concerns due to rapid industrialization causing pollution and resource depletion.

 

Way Forward

  • Ensure consumer protection and fair competition.
  • Maintain oversight to prevent corporate malpractices and monopolies.
  • Balance public welfare with business interests, especially in healthcare and education sectors.

 

Source: https://www.thehindu.com/news/national/govt-to-set-up-deregulation-commission-to-further-reduce-states-role-in-governance-pm-modi/article69225413.ece