The Aakhya Weekly #26 | Should we have Regulatory Budgets?
The Aakhya Weekly #26 | Should we have Regulatory Budgets?
In Focus: The Case for Regulatory Budgeting
There are many mantras that our current Government has made famous, which allude, however indirectly, to the immense cost of Government on society. “Minimum Government, Maximum Governance” has long been the war-cry of our Prime Minister, while politicians across the spectrum tout the “Ease of Doing Business” as a virtue.
All regulation places a burden on society. If the government mandates that you act in a certain way, you have the responsibility of meeting its diktat, and any money you spend doing so comes entirely from your pocket. Likewise, if the government requires that you not do something, you must cease to do so, and any benefits that would once come to you from the activity are lost to you.
While these are simple illustrations, there are larger, more unseen costs that a government can place on society. Imagine, for instance, that the Government places a cap on the price of cars. While one would assume this would create cheaper cars, fewer manufacturers may then try and build cars, creating a shortage in the market. Instead of cheaper cars, therefore, most may not find cars at all. (For more on such unseen effects, see this Econlib article.)
This is not to suggest, of course, that all regulation is bad. There is much that can go wrong if society is left entirely to its own devices, and it is the duty of the Government to correct these wrongs. Equally, however, the costs of regulation - even well-meaning regulation - can pile up, and the harms they do can come to outweigh the good. As we found in the 1990s, for instance, removing the often well-intentioned but costly controls on the Indian economy unleashed prolific and sustained growth, which we continue to benefit from to this day.
Democracies have built in checks against the over-reach of laws enacted by elected bodies. Legislators, as representatives of the people, have both the duty and the ability to raise their voice against laws that harm society. In practice, however, legislators regularly delegate substantial portions of regulation to executive bodies - including, in particular, independent regulatory agencies. Despite their considerable power, these bodies enjoy limited oversight (often due to a pincipal-agent problem, described here. As a result, while some such bodies, such as SEBI, have performed their role admirably, many others have languished.
Because of this lack of accountability, one must be circumspect about regulation imposed by administrative bodies. Regulations cannot merely be assessed on the basis of the benefits they claim to bring, but on whether the regulatory burden they impose are outweighed by these benefits. Unfortunately, however, such a cost-benefit analysis is far from the norm. In fact, there is no actual mechanism through which it can even be attempted. In its absence, the logic of power dictates that much of governance, over time, tends towards over-regulation.
This has prompted many thinkers, particularly in developed countries, to advocate for a ‘regulatory budget’. A regulatory budget would fix a limit to the cost that an administrative agency can impose on society. Aside from granting powers to a regulator, legislative bodies would also be required to specify a budget that a regulator has room to regulate within. Voting on such a budget would force legislators to actually consider the degree to which they are comfortable delegating power. Such a cost would also force regulators to think about the impact that their measures shall have. Even if these goals are not achieved, however, the mere existence of a regulatory budget would create a transparent, tangible indicator of regulatory burdens that the public can access.
In a country chronically addicted to over-regulation, a regulatory budget may provide the much needed salve of “Minimum Government, Maximum Governance”.
Jeff Rosen makes the argument for a regulatory budget. This paper provides the basics on a regulatory budget. This paper describes how ‘Legislative Impact Assessment’ can allow the tracking of regulatory impact, making a regulatory budget effective.
Tracking the G20
This past week saw the first Sherpa Meeting of India’s G20 presidency successfully conclude in Udaipur, Rajasthan. The meetings over the three days from 4th to 6th December saw participation from G20 members, nine guest countries, and fourteen international organisations.
The Prime Minister held an all party meeting on 5th December, asking states to tap into the potential for promoting tourism and boosting local economies of the venues where G20 meetings would be organised. In the upcoming week, things pick up pace across workstreams. The first Finance & Central Bank Deputies Meeting takes place in Bengaluru (13th-15th December) and the first Development Working Group Meeting in Mumbai (13th-16th December).
Check out this piece by ORF highlighting India’s opportunity to outline action specific Urban20 (U20) goals to link with the larger objectives of G20 and this explainer piece in The Hindu about the History of the forum and India’s presidency.
Top Stories of the Week
India considering oversight on algorithms used by social media firms
The Government of India is looking at a proposal to regulate the “algorithms” (proprietary codes) used by social media platforms and internet websites that are used for curating user-specific content based on profile and browsing history. If it pursues this course, India will become one of the first countries in the world to bring legal oversight over social media algorithms.
It is likely that such regulation will be made part of the forthcoming Digital India Act (DIA), which is expected to be released soon for public consultation. MeitY intends for the DIA to replace the Information Technology Act, 2000, which is now considered an obsolete legislation. It is likely to cover, in addition to enforcing algorithm accountability, regulations on artificial intelligence, quantum computing, the metaverse and so on.
The DIA is also expected to cover the crucial issue of anonymized data and prescribe regulations for its processing, particularly by big tech firms. This, if true, would fill an important gap that has been left unaddressed in the recently published draft Digital Personal Data Protection Bill (DPDP Bill). Techniques do exist by which anonymized data can be de-anonymised and converted into personal data, for which the DPDP Bill (in its present form) does not provide a solution.
India Launches its Green Energy Transmission Plan
On 7th December, the Centre launched a plan to develop the power transmission system for integration of 500 GW of green energy by 2030 through an investment of at least ₹2.44 lakh crore.
The plan came following consultations within a high-level committee constituted by the union ministry. The committee, headed by the chairman of the Central Electricity Authority, had representatives from Solar Energy Corporation of India, Central Transmission Utility of India Ltd, Power Grid Corporation of India Ltd, National Institute of Solar Energy, and National Institute of Wind Energy
As per the roadmap, the planned additional transmission system includes 8120 ckms (circuit kilometers) of High Voltage Direct Current Transmission corridors, evacuation of 10 GW offshore wind located in Gujarat and Tamil Nadu, and an increased inter-regional capacity to about 1.50 lakh MW. The plan raises expectations and paves a path to achieve India’s energy commitments.
This Week in Policy
Economy and Taxation
The Reserve Bank of India raised the repo rate by an additional 35 basis points, to 6.25%. It has also lowered its growth forecast from 7% to 6.8%, citing a bleak global economy.
India’s services PMI rose to a three month high of 56.4 in the month of November, up from 55.1 in October. The results indicate that India’s service sector, particularly for contact-intensive services, is the strongest sector of the country’s economy.
Labour
Unemployment in India has risen to a three month-high of 8.00% in the month of November, up from 7.77% in October, as per CMIE data.
Agriculture and FMCG
Ministry of Agriculture and Farmers Welfare to create an integrated “Agriculture Investment Portal” - a centralized one stop portal for agri-investors to avail benefits of government schemes related to agriculture and allied sectors.
Healthcare
The Meghalaya Government has launched Asia’s first drone delivery hub in partnership with the start-up TechEagle, aimed at providing universal access to healthcare for residents of the state. The project shall involve the delivery of medicines, vaccines, diagnostic samples and more through a dedicated drone delivery network.
The Government intends to release the National Dental Commission Bill, 2022 in the winter session of the parliament. The Bill intends to restructure the Dental Council of India into the National Dental Commission, improving its efficiency and effectiveness.
Foreign affairs
India has reached out to both Russia and Ukraine and stressed on the need for a return to diplomacy and dialogue to end the conflict, the MEA has said in response to a question raised during the ongoing Parliament winter session.
Technology, Media and Telecommunications
The Kerala High Court has held that arbitration is barred in respect of matters which are subject to the exclusive jurisdiction of the Telecom Disputes Settlement Appellate Tribunal under the TRAI Act, 1997.
Industry bodies like COAI and IAMAI are divided over whether telecom regulation applies to OTTs under ‘same service, same rules’ principle.
International trade and commerce
The Commerce and Industry Ministry will soon notify quality control orders (QCOs) for assessment of electric fans and meters, particularly those being imported from China, after having successfully implemented QCO measures for regulating imports of toys.
India looks to reduce import tariffs on gold to curb smuggling.
Banking, Finance and Insurance
Sebi relaxes rules for govt for PSU disinvestment, dispensing the requirement of calculating 60 days' VWAMP for the determination of open offer price. Considering PSU disinvestment spans over a long periods, a requirement of determination of open offer price under the takeover regulations many a time acts as an impediment in fructifying such strategic disinvestments.
RBI announces four-tiered regulatory framework for urban cooperative banks, based on the size of the banks, to come into effect immediately to strengthen the financial soundness of the UCBs. Considering the heterogenity of the sector, the categorisation may be used for differentiated regulatory prescriptions.
Manufacturing
Indian Government initiates talks with lithium-rich countries- Bolivia, Chile and Argentina among others to ramp up domestic battery manufacturing capacity and reduce the dependence on imports.
With an outlay of Rs 120 crores, the government has approved the production-linked incentive (PLI) scheme for drones and drone components till 2025.
Logistics and Infrastructure
India launches first-of-its-kind, National Logistics Portal - Marine, to provide B2B (Business to Business) and B2G (Business to Government) services for marine trade stakeholders.
Under PM GatiShakti, 55 Central Ministries will spend approximately 10% of their budget to improve logistics infrastructure in the North East.
Sustainability
Paddy crop residue burning events in Delhi-NCR and surrounding states show a marked decline of 31.5% YoY, with stubble burning incidence in Haryana down by 47.60%.
Odisha government notifies Renewable Energy Policy, 2022. The policy outlines state’s plan for increasing renewable energy consumption, particularly through captive and open access modes. The policy will remain in force till 2030.
DISCOM Aggregate Technical and Commercial Losses (AT&C Losses) decline significantly. Government’s analysis of data for 56 DISCOMs contributing to more than 96% of input energy, indicates that the AT&C losses of DISCOMs have declined to ~17% in FY2022 from ~22% in FY2021.
Upcoming Events
25 Years of BIMSTEC: Opportunities and Challenges in the post-COVID 19 Era
December 12 | Virtual
ICRIER, in partnership with NITI Aayog and Adenauer Stiftung, is organising a webinar on “The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC): 25 Years of BIMSTEC: Opportunities and Challenges in the post-COVID 19 Era” on December 9th, 2022. The discussion will revolve around strategy for financing and implementing the BIMSTEC master plan, fast-tracking of the governance framework through the CSA and MVA, trade facilitation measures for seamless connectivity across borders, and aligning of national plans with the regional initiative. BIMSTEC is an international organisation of seven South Asian and Southeast Asian nations, housing 1.73 billion people and having a combined gross domestic product of US$4.4 trillion. Registration Link.
Global Semiconductor Industry – India’s Path Forward
December 13 | Hybrid
The Centre for Social and Economic Progress is organising a seminar on “Global Semiconductor Industry – India’s Path Forward” in hybrid mode on December 13th, 2022. The panel of experts will outline the structure of the semiconductor industry, the US-China competitive dynamics and the opportunities for India to enter this highly competitive but vital industry. It will focus on how the semiconductor industry in India could pan out in the near future thereby positioning the country as a major player in the electronics value chain. Arogyaswami Paulraj, Emeritus Professor at Stanford University will deliver the seminar, and the discussion will be moderated by Vijay Kumar Saraswat, Member, NITI Aayog. More Information | Registration Link
Transforming Rights: How Law shapes Transgender Lives, Identity, and Community in India
December 9 | St. Joseph’s Institute of Management, Bengaluru
The Centre for Law and Policy Research (CLPR), Bangalore, is organizing a panel discussion titled “Transforming Rights: How Law shapes Transgender Lives, Identity, and Community in India” on 9th December, 2022 at St. Joseph’s Institute of Management, Bangaluru. The discussion aims to bring together academics, activists, lawyers, and members of the transgender community, to push new boundaries for a transformation of the law and explore the intersections between the multi-layered complexities of trans lives, law, and community. Dr. Svati Shah, Associate Professor, Women, Gender & Sexuality Studies, University of Massachusetts, Amherst; Santa Khurai, Manipuri indigenous Nupi Maanbi scholar and activist; Kalki Subramaniam, Founder, Sahodari Organization and trans activist will be the speakers for the event. More Information.
A Few Good Reads
A pioneering Afro-Asian conference, a CIA assassination plot to kill the Chinese President and an air crash over international waters - read this fascinating story of the dark side of geopolitics by P. Raman.
Recent iterations of generative AI - ChatGPT, Stable Diffusion and the like - herald what is by now certain to be a complete transformation of society. How should Governments anticipate this change, wonders Samuel Hammond.
The world is becoming more unpredictable as technology enables individuals to leave an ever-larger impact on the world, writes Daniel Goodwin.
Sumant Banerji explores the grimy reality of how imported products are smuggled into the country, hidden from the eyes of revenue officials.
In many Indian states, GDP growth doesn’t bring a corresponding rise in per capita incomes. For better results, we must ensure that women are educated, argues Vivek Kaul.
Tweets of the Week
One of the under-studied political stories of the last 20 years is the rise of India’s regional political parties, as Richard Rossow notes:
Can Artificial Intelligence programs show distinct political leanings? David Rozado explores:
A first look at G20 in India, courtesy of Tawqeer Hussain:
Key Notifications
Ministry of Power issues order for waiver of Inter State Transmission Charges (ISTS) on transmission of electricity generated from new hydro-power projects.