Evolving regulatory structures and the receding public sector: seeking a convergence

Abstract

Two seemingly unrelated phenomena of the post-reform India, viz. the evolution of the independent regulators and the shrinking of the public sector are discussed. Firstly, the slowing in the privatization and disinvestment drives in developing economies is recognized and explained. Taking the case of Indian Telecom, it is shown then that it was the strong lobbying of the private players and their resolve to dismantle the state-owned player than mere efficiency rationale which led to the setting up of the independent regulator.Then we link the mushrooming independent regulators and the drive for rapid privatization to the policy advocacy of international donor agencies. Further, taking a stand that the State can still deliver better, a case for significant public sector presence in a developing economy context is made. Finally, an attempt to connect both these questions through convergence asks for rejuvenating the public sector as much as for incentivizing the private interests through regulation.After all, being market-friendly does not have to mean being government-unfriendly.