(Sample Material) Gist of Important Articles from IIPA Journal

Topic: Revamping the Role of Government as a Regulator O.P. Minocha

Owing to the emerging trends of globalisation along with liberalisation and privatization, during the last two decades, there have been significant changes in the role of government, particularly in the developing countries. Some of these countries are still in the process of restructuring their administrative system. This emerging trend has a large number of implications for policy-makers, administrators and academicians. Since July 1991, to implement “New Economic Policy”, a number of policy options and administrative initiatives have been experimented in India. Even the second Administrative Reforms Commission in its approach paper on “Reforms in Governance and Administrative” has highlighted some of these issues. The Commission, as per terms of reference is engaged in, “to suggest a framework for possible areas where there is need for governmental regulation (regulators) and those it should be reduced”.

A large number of developing countries had received loans from the World Bank and/or from the international fund agencies. The loans were conditioned on the promise, that, the recipient countries would adopt free-market policies and bring about structural adjustment. Those structural adjustment programmes aimed at both macro-economic and macro-economic changes. On the micro side, the main objective was to improve efficiency in the use of resources by removing price distortion, opening up more competition and removing administrative control (deregulation). It also aimed at reducing government’s intervention in areas where private sector can operate more efficiently. Thus, the structural adjustment aimed at less government, free trade and greater role of private sector. This is opposed to the philosophy of state intervention for economic development and commanding heights of public sector.

However, currently some disillusionment has set in owing to the failure of state intervention leading to corruption, arbitrary exercise of power, dismal performance of public sector and non-satisfactory services to the people. It is argued that “in recent years more interventionist states have experienced lower growth rates, as well as less liberty, than states whose development strategies relied more on the private sector.” In the context of current disillusionment in the developing countries, may be, we are forgetting the past disappointment with the private sector resulting in unfair trade practices, exploitation of consumers and reduction in non-agricultural employment. Even the institutional functions of free market are generally weak in developing countries and the existing environment does no favour to efficient competition resulting into malfunctioning of markets. Given the imperfection of both the market and state, the developing countries must instead of debating on “state versus market”, should opt for synergic relationship between state and market. On the basis of government’s role, the functional goals of state can be redefined by adopting three-fold classification, namely the ‘core’, ‘participatory’ and ‘auxiliary’. The ‘core’ activities may relate to those aspects which are given by the Constitution and which the government is supposed to perform at all times. That role is governed by societal expectation and thereby the government should have the exclusive responsibility. This may include atomic energy, defence, forest, space, science and technology, and public order. The ‘participatory’ role may include those activities where private sector may supplement and compliment the government’s responsibility of providing goods and services. Some of these activities can be in the sectors of coal, chemical and fertilizers, civil aviation education, energy, information and broadcasting, health welfare, petroleum, post, steel, surface transport, and telecommunication. The ‘auxiliary’ activities may include those areas where the private sector has managerial capability and endowed with competitive edge over public sector. Taking cognizance of this classification, the government has already adopted some policy initiatives and administrative reforms in his direction. Those include ‘corporation’, ‘outsourcing services’, ‘privatisation’.

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