Eagle eyes: Fostering competition, fair play
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India's policymakers are yet to come to terms with the idea of a strong regulator. But some of these watchdogs are proving their mettle
Perfect market is a concept that best serves as a hypothesis. Reality, to be sure, is far apart. Strong regulation is, therefore, a prerequisite for keeping errant players from distorting markets and inflicting collateral damage on the economy.
There are myriad ways by which even a market supposedly healthy and robust with the presence of a sufficient number of unconnected players can be undermined all too suddenly. The tendency of firms to become too big (a condition that would naturally make them prone to fixing prices), form cartels and indulge in speculative activities necessitates regulatory intervention.
The US sub-prime mortgage crisis that escalated into a global financial meltdown in late 2000s exposed the perils of regulatory ineptitude/dishonesty at multiple levels, America's monetary authority Federal Reserve not excluded.
More recently, the multi-billion dollar trading loss suffered by JPMorgan Chase left few in doubt that financial regulation ought to be stronger (lest it would lead to the collapse of the financial markets and by extension, weakening of the real economy).
For an emerging market economy like India where a culture of regulation unfettered by the powers that be is yet to set in, a few assertive voices heard in recent years from some of our regulators have been noteworthy. While the Reserve Bank of India (RBI) managed to resist an orchestrated call to cut interest rates before it felt it was time to do so, the year 2012 belonged particularly to the Competition Commission of India (CCI). Incipient, the Commission has imposed demands (penalties) amounting to more than R7,000 crore on firms it says have employed anti-competitive practices (read cartels) or abused their dominant position in the market to the detriment of competition.