Shining orders
Indias regulators have taken two decisions that deserve to be applauded. In the first,the Securities and Exchange Board of India,or Sebi,cracked down on two companies of the Sahara group. The two housing-sector companies had raised Rs 4,8000000000 through the markets; Sebi directed the companies to repay that money,and disbarred its directors,including group chairman Subrata Roy,from associating themselves with any public company that would raise money from the markets till the repayments were made. Then the Competition Commission of India fined the National Stock Exchange,or NSE,Rs 55.50000000 5% of its average turnover for three years for abusing its dominant market position,in particular to squeeze out rival exchange MCX. These are exemplary orders,in that they have both taken on powerful insiders. The Sahara group has considerable political clout; and yet,faced with toughness from Sebi,there has been little dissent; the ministry of corporate affairs,in fact,went so far as to issue a statement that it did not intend to intervene. The NSE,too,represents those with considerable clout,being an often-quoted example of the gains of liberalisation; and,even so,it has been shown that it is subject to regulatory control. The courts are now examining both disputes. Clearly,competent,independent,emboldened regulators are at work to monitor 21st century capitalism. Creating a restrictive framework of laws stifles innovation and growth. Nor can faith in the abilities of ex-ceptional individuals be the foundation of a long-term solution. Indias growth requires it to construct and empower a stable framework of credible regulatory agencies. The modern economy works on trust; and it can,at its worst,lead to crony capitalism. There is no way to root out that problem unless you have strong institutions overseeing market transactions. and that applies to the political-economic domain,too. The Election Commission has shown what a power an independent,credible institution can become. The CAG,too,has demonstrated its autonomy recently. Such examples are,however,too few. The petrochemicals sector,always at risk from cronyism,is not yet properly regulated. An approach paper from the Planning Commission earlier this year that laid out proposed regulatory reform is a good way to start. Indias economy and politics are already complex,and are growing more complex still. There are no quick fixes,no short cuts to ensuring their continued health; no police-state interventions will work. But the expansion of independent,depoliticised regulation will.