All of these, if present, reflect a country's total commitment to the principles of fairness, equity and growth with justice. Clearly, India has not made such a commitment across the board. India's regulatory institutions in the areas of energy, telecommunications, financial services such as banking and insurance, or the environment do not meet some or all of the above criteria.

The leaden hand of bureaucracy still insists on treating the regulatory agency as a subordinate office of the Ministry in question. This is not just wrong, it is absolutely counter-productive, for the reasons articulated above, and will only harm India's being taken seriously as a global player. Take three instances.

The recent nomination of the Director-General of Hydrocarbons, the petroleum regulator, to the board of ONGC, a regulated company, violates all principles of regulatory independence and, for that matter, corporate governance.

The travails involving the establishment, modification and re-design of the structure of the Telecommunications Regulatory Authority of India (TRAI), the removal of the original members and their replacement by others, and the continuous interference by the Ministry of Communications in TRAI's activities send strong signals that all is not well in the area of telecom regulation.

There is another administrative malady that needs to be looked at. That is the compulsion felt by every Minister and every Secretary to the Government to comment on every matter, howsoever prosaic or technical, and most often not within the Minister's or the Secretary's area of competence, thus undermining the credibility and morale the experts.

Thus, a junior Joint Secretary in the Department of Economic Affairs, or an untutored Minister, with little expertise, may have the gumption to interfere in the workings of the Reserve Bank of India, a body respected in certain fields of economics.

That such an approach to the Finance Ministry and central bank was wrong was recognised by the UK's Chancellor of the Exchequer, Mr Gordon Brown, in 1997, when he let the Bank of England become a completely independent entity.

The way out

What problems does the lack of independent regulation give rise to?

First, the integrity of the regulatory process is called into question.

Second, the possibility of arbitrary changes being made in the rules are heightened.

Third, with political changes being a fact of life in a democracy, capriciousness in government attitudes can lead to random changes in regulatory policy.

Fourth, and this is the worst outcome, if one is an investor sinking billions of dollars into a country like India, the element of uncertainty is substantially heightened and that seriously enhances investment risk.

But is there a way out? Absolutely. India does not lack independent entities that do retain some integrity. For instance, the legal system.

The Supreme Court, the High Courts and the subordinate courts do still command a certain level of trust in their integrity relative to the country's administrative machinery.

Then there is the Union Public Service Commission (UPSC). It is an independent, constitutional body. By and large, its choice of those selected to serve as government employees is fair, equitable and honourable.

In fact, recruitment to the government services, both civil and military, is probably cleaner than recruitment into the services of almost all private enterprises.

The Central Vigilance Commission is an independent body that receives a certain extent of approbation. The Comptroller and Auditor General of India (CAG), too, is a constitutional body that could flex its muscles, if it chooses to. Whether it does or not, however, rather depends on the personality of the incumbent CAG.

Similarly, on the administrative and social fronts there are the Central Administrative Tribunal and the various State Administrative Tribunals, the Central and State Human Rights Commissions and similar bodies. If, on the administrative and social fronts, India can get its act together, why cannot it do so on the economic front?

Independent entities

The way out is to make all critical 21st century economic regulatory agencies definitive of India's institutional capabilities as a key 21st century player on the global field, as constitutionally established bodies along the lines of the UPSC or the office of the CAG.

That way they will be no longer attached or subordinate offices of Ministries or Departments.

There are several existing, or to be established, regulatory bodies that will benefit from such treatment. The telecommunications regulator, regulators for energy, the environment, financial services, infrastructure areas, and the Competition Commission.

Similarly, regulatory agencies for petroleum, water supply and riparian issues, an extremely important but neglected area of policy discourse, or the exploitation of India's ocean potential, all deserve constitutional independence.

These agencies have quasi-judicial functions, but also deal with economic as well as technological issues that are substantive and substantial. In a sense, these agencies deal with issues that are at the interface of law and economics.

It is understandable that India does not yet have the competencies that permit assessment and analysis of crucial issues that are at the intersection of disciplines such as law and economics.

But, it does have experience in setting up quasi-judicial and independent agencies. There is a historical precedent that can well be drawn upon.

It is imperative that the organisational super-structure is designed with the singular aim of enhancing regulatory independence in the economic sphere.

The way to move ahead on that dimension is to provide constitutionally mandated independence to crucial regulatory institutions.

(The author is Professor of Technology Strategy, University of Texas, Dallas. Feedback may be sent to majumdar@utdallas.edu)

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