Best of BS Opinion: How can government best deal with regulations

We look at today's editorial and opinions in the backdrop of regulatory perspectives across sectors such as markets, agriculture and banking

A regulatory system are any government’s favourite tool for controlling outcomes or, at the very least, processes. But what does one do when faced with something or someone uncontrollable? Perhaps, then, the best bet is to roll with the punches and hope for the best. Let us see what our editorials and opinions have to say on this idea.  

 

Our first editorial starts with Prime Minister Narendra Modi’s recently-concluded trip to the US, which saw a relatively co-operative-sounding joint statement about a trade agreement. However, given the mercurial nature of US President Donald Trump’s pronouncements, it argues that India would do well retain a sense of proportion, as well as a clear understanding of his unpredictability. Instead, India would do well to look for easy issues that Washington can claim as wins in order to build trust between the two countries.   

 

 

The markets seem to have been in a bear-hug for the past few weeks, as our second editorial notes. Indeed, equity markets are widely considered the gold standard for self-correction. However, this round of correction could be testing times for retail investors, many of whom have bet on smallcaps, which seem to have an irrationally high price-to-earnings ratio of 34, way ahead of midcaps at 28 and even the Nifty at 21. The economic outlook is muddy on all sides, and retail investors could be in more pain barring significant momentum in profit growth.  

 

Our columnist Ajay Shah weighs in on the idea of de-regulation, and how these might be best designed to have minimal bad outcomes. Government regulations, he says, reduces economic freedom and hurts growth. Good regulation is one that has a positive outcome on addressing market failure, while imposing the least adverse impact upon economic efficiency, innovation and GDP growth. In India, he says, we need to change the very way regulators work rather than find band-aid fixes to regulatory overreach.  

 

The government has now set up a board to oversee makhana (foxnut), barely two weeks after one for turmeric, notes Sanjay Sud. These regulatory bodies are meant to promote the production, processing, value-addition, marketing, and export of each commodity. India is the world’s largest producer and exporter of turmeric, but given its poor quality, is ironically also the world’s second-largest importer. Similarly, Bihar grows 90 per cent of the country’s makhana, but most of it goes to other states for processing because the state lacks facilities. These two regulatory bodies will have to be judged by what outcomes they deliver.  

 

For our book review today, Jennifer Szalai picks up Jeffrey Toobin’s ‘The Pardon: The Politics of Presidential Mercy’, which is a look at the history and politics of pardons granted by the US President as part of his/her executive powers. Alexander Hamilton argued the absence of it would make justice look too cruel. However, over the years, its use has been overtly political, from Gerald Ford’s pardon of Richard Nixon over Watergate, to Joe Biden pardoning his own family pre-emptively, and now Trump exercising it en masse for the January 6 protestors.  

 

The government is contemplating one regional rural bank (RRB) per state, which will bring down their number from 42 to 28 (bar Goa), writes Tamal Bandyopadhyay elsewhere in the paper, but he also questions the very logic of their existence, given their poor performance as well as opacity of accounts. Add to this the challenge from other channels such as business correspondents and technological advances in banking, and one might question the need for RRBs. Merging  them with their parent banks would help, but is tough because current regulations prevent transfers of personnel across states.