REGULATORY BODIES

• Regulator is new concept.

• Di3erent from the 3 comments of democracy: judiciary, executive and
legislation. Doesn’t fit into the perfect structure of 3 branches
• They are institution set up by people (an exception to the general norm), through
the political executive.
• Made in response of current priorities
• In such bodies experts decide on complex matters, these bunch of experts are
regulators.
• The challenge then comes is that are these authorities ok, because they are not
chosen by the govern we made.
• Complex di3icult to determine the ambit of regulators. Di3icult to decide where
should they stop or fence its powers.
•

How they came up

The concept of regulators developed after WW2. There were very few as parliaments
were still developing.

Post WW2 demands of people changed and technology had then come into more
picture,

After the emergence of globalisation capital played di3erent roles. Capital flowed
among countries, which needed protection of capital . Thus foremost job of regulators
was to protect capital.

The major question was what rules will govern this capital. There was need for a uniform
system for governance of capital.

In response countries started setting up regulatory bodies, with establish a system and
framework.

Eg. For FDI to come to a country there had to be uniformity of rules which required
establishment of regulatory.

Every time FDI was expanded for a particular sector, new regulators were set up for that
sector.

These regulators are made as there are many complex issue which might not be
ministries but only by experts in form of regulators.
Importance

Regulators reduce risk for business as they provide a common platform to di3erent
business. They create a predictability which helps business to flourish.

Challenge

Regulatory is expensive to set up in terms of people, infra etc.

It takes years for an independent regulator to set up till it is fully detached from the
parliament and is an independent authority.

Eg RERA a soft regulator took along time to come up as independent regulator , as

businesses didn’t want rules to be set up for this sector.

There are new risks that are emerging example ESG. Regulators play an important role in
social welfare.

it is easier to enforce behaviour compliance through non-elected bodies ie regulators

it is a paradox of democracy that we are now moving to a non elected system. This is
because regulators are experts on the subject matters, in which parliament and
ministries might not be.

Changing landscape

regulators work for a common or uniform standards which leads to a common

governance structure.

But it remains a question of why common structure? as what might work for one country
might not work for another country. But countries want common structure to make
everything uniform for everybody, and which is harmonious.

Regulator in India

Regulators in India don’t have law making power. It is parliament which sets the laws.

In India some regulators are set up by parliament (eg RBI ) while some by executive (eg
NHAI)

The first regulator in India was TRAI for the telecom industry, thus the telecom was the
first industry which got liberalised in India, which required a uniformity of laws and
framework for companies to come and invest.
Regulators in India don't have law making power. The parliament sets the laws for the
country and the executive that is the ministry is answerable to the parliament.

There are many regulators set by the parliament example of RBI and some are set up by
the executive branch example NHAI.

Regulator comes below the parliament. Parliament is the principal and regulator is the
agent. Regulators are answerable to the principal and the ambit of the regulator is set
up by the parliament itself.

Example RBI governor never shows up in the parliament to be the accountable, it is the
finance minister who is accountable.

This poses the challenge that there is no way to monitor the regulators and there might
not be an oversight over them.

Regulators don't develop a market it only sets rules for operation of market

There are regulators based on di3erent categories:

1. Recourses- PNCRB, TRAI
2. Competitive issue – RBI, SEBI, CCI, IRDA
3. Utilities – DGCA, CERC, FSSAI

Currently in India there is a lack of regulator in the social sector, as social sector faces
many challenges such as sex ratio.

Objectives of regulator

1) Role clarity
2) Independence- Freedom to take decision without influence of market
3) Ability to take decision/ decide
4) Funding
5) Transparency
6) Composition – member / personnel in the regulator – avoid problem of
bureaucracy
7) Communication – Communicate to people that what was the necessity taking
any decision, maintain its accountability.

Something legally permissible may not be the right thing to do

Important measures to be taken into account by the Regulatory bodies

• Need to go slow
• Think about future
• Be a bridge between business and govt
Pricing and problems with setting price by the govt

Price depends upon info availability.

Asymmetry of info leads to monopoly, as flow of info gets restricted and ability to
choose between alternatives reduces.

This also leads to increase in prices

Once info is available essential to ensure the flow of it is smooth between people and
market. There should be no lemons market.

People sometimes miss-out on good deals due to limited or restricted information.

Essentials of pricing:
• Price should be flexible
• Info on that price should be easily available
• People should have means to check whether the price is correct or not

Price control leads to market ine3iciency, as price should be determined through forces
of demand and supply

Thus, Price control is not always the solution for govt to control the economy

Regulatory set up is establish to provide price freedom to business ie freedom to player

to determine the prices.

Freedom of price determination helps new competitors to come in. As price control
reduces the incentive for manufactures or producers to produce goods and services.

Price control also leads to deficiency of quality of goods and services. Eg railway

Price is based on :
• Entry barriers- Freedom of entry and exit in market
• Merit based
• Market freedom

Example in railways in India there is no freedom of entry which leads to decreased

quality of services.

- Price is mostly paid when we have adequate information available to us.

- Information makes the decision correct. In socialist economy and the
information gets lost, rather than people making choice government starts
making choices for them.
 - Pricing is thus an important aspect of a PERSONS life.
- Information allows the good flow of goods and services in the economy.
- The problem in developing underdeveloped economy is that information
available to Poor person is less due to which they are unable to take correct
decisions.
- Example shoe repair in Sonipat is lesser PRICE than of Mumbai. The person in
Sonipat has less info due to which he is unable to migrate to Mumbai keeping the
price loan.
- Information is not widely available at the government has to determine prices,
but it wasn't the situation as there is shortage or over supply. Also black
marketing.

Externality

- There are goods for which price set by market forces is very unfair. These are
externalities.
- It is the price paid by person not involved in the transaction. Example someone
else smoking but I didn't take that air. It is the cost for me this is negative
externality.
- Someone playing out sound near my house.
- Someone does pollination nearby. My flavour also pollinates. This is positive
externality.
- Coas theorem.-If the level of externalities limited price can be set to it.
- Negative externality can be extremely damaging for countries Sometime
example experiment in china led to COVID. Positive externalities can be
extremely beneficial.
- Health sector mostly faces negative externalities due to the e3ect of insurance
system which changes the price for health care system. It is even though.
Unintended.
- Sonography machines were bought for good use but had e3ect on sex ratio.
- The government destroys the market rather than solving the problem. Example
shortage can't work out just by nationalising any sector The problem has to be
solved.

Government control on prices leads to.

1. SOE- state owned entities to control the prices. Example Railways of India.
2. Inequality- example, Black market creats problem in the society.

Regulators break the system the ensure that pricing makes fuelling in the economy.
Ensure price signal is correct.

It is supposed to create place without any favoritism. This is the role of regulator.

Prevents false signals in the market. Example SEBI prevents any false signals of price
change in the stock model.
Regulator tries to create e3iciency in the market.

Example, the regulator had changed the even after government spending so much on
health sector, the out of pocket expense is high.

Two reasons why the latest are there.

1. SOE
2. Inequalities.
Regulators ensure that people get value for money they pay.
EXTRA

Background
The Role of the state in Economic and Social life has dramatically changed from being the
main provider of Social and Economic Services to being A Rule-maker and Regulator. The
new mode of the State with its structures and relationships is characterized by an increase
in the Regulatory Functions and Responsibilities. These changes have paved the way to the
emergence of a state increasingly defined by the Volume, Diversity and Complexity of its
Regulatory Institutions. This state is known as the Regulatory State.

What is Regulator?
Subsystem or independent device that determines and maintains the operating parameters
of a system, usually within certain prescribed or preset limits.
A regulatory body is a Statutory Commission or Board constituted in accordance with the
applicable law for the purpose of regulating public utility industry, licensees or services that
aKect the consumers, directly or indirectly.
In a regulatory or supervisory role, a Regulatory Authority of India is a public entity or
governmental body accountable for exercising independent control over specific areas of
human activity. They are in place to ensure that safety and norms are adhered to.
Regulatory Authorities are government-created institutions that regulate, supervise, and
govern diverse industries like insurance, finance, education, and healthcare. Each sector in
India has its Regulatory Authority. They may be independent or act under executive
supervision.
Every regulator is instrumental in making sure that the interests of the investors and all
other parties are not compromised and that there is fairness in the financial system of India.

Why we need Regulators?

• Prevention of Market Failure
• To Check Anti-Competitive Practices
• To Protect and Promote Public Interest

Functions of Regulatory Authorities

• Remedial measures
• Regulations and instructions
• Review and evaluation
• Enforcement
• Licensing/Inspection
• Guarantee that the market is fair and transparent, especially after liberalisation.
• Provides private investment with functional autonomy and protects them from any
intrusion.
 Telecom reforms in India. - TRAI

Innerwear Times Telephone was a luxury, but not telephone has become a very
important communication equipment. Telecom equipment was d licensed in 19 9100.
The new economic policy.

AIM

• Government wanted to involve private sector.

• To decrease imports, they wanted companies to come to India to manufacture.
• But this was all happening without any regulation.
• All di3erent companies having di3erent standards.
• Parliament came up with National Telecom Policy 1994.

Basic service auction was held in 1995. To bid for providing telecom service which was
earlier only done by government.

But auctions were held without upfront payment and it was speculative bidding. Not
knowing how many will come up. This led to bankruptcy of the sector as bidding amount
went high.

• They sould have had auctions with upfront bidding to remove non serious
bidders.
• Regulator was establsihd in 1997. TRAI
• New telecom policy came in 1999, announced mitigation from Fixed license fee
regime to revenue sharing. Since company ran into losses.
• But definition of revenue was very vague.
• Example, revenue of Vodafone came from di3erent sources other than telecom.
So how much the government could share with a question?
• TRAI was not strong enough at that time as its suggestions were rejected.
• Something legally punishable may not be the right thing to do.
• Government came up with first come first serve policy in 2004 and allowed
merger of cellular licenses with wireless in local loop.
• This change was done without informing the regulator.
• The policy was not clearly defined.
This bought huge change in market? This let the players to jump que.

This loophole got exploited by next government in 2010.

The 2G spectrum scam

 • Telecom ministry Raja misused this loop allowed massive amount of bidding.
• He wanted to expand, anybody could bid this lead to, Entry of non-serious
players and lack of spectrum.
• Led to increase in price of spectrum.
• After winning spectrum, it is still need higher capital investment from the
company.
• This led to deterioration in services of telecom to customers as the provider did
not have enough money to now add new technology already spent high prices on
spectrum. The prices were low, but the investment also became low.

TRAI – PRICE

• In 2018, the Jio Reliance made the prices lower and increased the investment as
the ambani had lot of money out of his other businesses.
• Other companies couldn't cope up as they didn't have money to invest.
• Other companies went weak, resulting in monopoly.

Regulatory measures.

• Need to go slow,
• Think about future.
• Be a bridge between government and businesses.

Supreme Court verdict on Vodafone.

Upheld government slash DOT’s Definition. Vodafone has almost end up being the
government company.

Latest changes.

• Major telecom auction for Waves spectrum.

• Satellite wave, should there be auction on allocation of it?
• In Current auction for 5G waves. These rates are high for telecom function. In
turn, the telecom rates for consumer is going high. Telecom sector is now
growing towards monopoly.
 HEALTH REGULATOR

The out-of-pocket expenditure from total health expenditure

-Out-of-pocket is high in Punjab as the drug intake increase

-It decreases more in southern states probably because they tend to make their existing
facilities better rather than building new hospitals like Northern states.

Health outcomes

The aim is to reduce the number of expensive citizens and provide better results in
government expenditure. The money spent by the government should have similar
quality in practical life

even if expenditure by the government in the health sector is high, the out-of-pocket
expenditure by people might be high, as people might not be getting good service. For
example, dialysis service is not available even if the big hospital is made.

Supreme Court ordered a national task force to regulation the list of hospitals in the
health sector at all government levels.

A huge number of hospitals are run by railways and the labour ministry, and each has
di3erent standards

Other agencies involved in helath sector- private hospitals, drug manufacturers,

dispensaries and influence companies.

Nature of Regulator
No singal regulator for agencies ie hospital.
Private sector hospitals - NABH,
Drugs- ODSCO,
Medicine supply chain- CDSCO,
Doctors- National Medical council

Issues with health sector regulator

If a national task force is created, it certainly raises the cost of health It may be directly
or indirectly
the regulator has to be big in its range to cover wide operations from drug pricing to
control malpractice, but this will be very expensive, and it can't be an expert in every
aspect. The outcome depends on what kind of regulator is set up
In the health sector the issue is that there is a wide range of activities to look at, for
example, clinical trials in a very niche, the standard of construction of hospitals, and
confidentiality of records.

There is no medical regulator in India to look into the high costs of medical services in
insurance cases.

Challenge- the number of agencies that could be involved in this sector would be very
high. Probably, this is because there is still no regulator. Health is a challenging issue
complicated expenditure is just a small part of the big picture the main issue is
regulatory capacity. The health sector is also related to climate issues.
LATERAL ENTRY

Lateral entry is entry into civil services without exam like from private sectors, academia
or PSU

there are four stages of civil services- Class 4- Junior most. Class 3- Clinical services or
support services. Class 2- Designated o3icers. Class 1- The main o3icer. From Class 4
to Class 2 make 5th 75% of government employees.

Recruitment happens at all these four levels. Class 3 is very important as they are the
one who writes files and notes and are thorough with lanes in the British era, the o3icers
were ranked and named according to the o3ice they were in.

In class one o3icers, the ranking starts from Under Secretary to deputy secretary to the
director ( The main knowledge and called main) to joint secretary to additional secretary
to secretary. This is an example of secretariat government allowing people from lower
class o3icers to appear in exams at the lowest level of class one o3icers. The ranking
system is necessary to ensure a flow of order usually, decisions are created at a class 3
level at the clerical stage. The government has become more sophisticated, and
gradually now, most directors and joint secretaries take decisions. As they have
detailed knowledge of the subject. In railway station master result of Class 2 o3icers
and in India, there are very few civil servants and personnel

there is only one joint secretary in FATF, which is very few as many countries want
assistance from that, and also he is the person who controls the capital market of India.

The recruitment rate in class 3 and class for o3ices is low because of the high cost
stone salaries the gap between the salary of private and public sector employees in
class 3 is high thus, there is corruption increasing in class 3. The incentive in class one
is high therefore, the applications in this level are also very high. Class 3 people are not
interested due to low incentives thus the responsibility is coming to class one there is a
need to increase intake at the level of district and joint secretariat some cases from
upsc exams, and Thursday is the need for lateral entry coming from this sector as they
bring expertise.

The first lateral entry happened in 1996.

Civil servants are divided into di3erent cadres people in the same cadre perform similar
activities, for example IPS, IFS, Indian Auditor and accounting services, IAS IRS. The
major 2 services in Indian civil services are IAS IPS IRS. The decision should be taken by
class 3 but because of problem in recruitment system low incentives and high level of
technicality, these responsibilities are shifted to class one. The centre recruits civil
o3icers, so they wind through the UPSC and state exams.

The problem with the lateral entry scheme is that any decision in a government like India
is made through the input of executive o3icers like civil servants. So, do we need to have
a lateral entry scheme for experts to enter at a low rate for very few people or should we
let them sit out of the government system and take input from them?

It also curates problem of letting low qualified people or not deserving people enter this
system through corruption or connections but this is checked through qualification
criteria. This also creates problem of insider and outsider where civil servants might not
treat them as equal.

The lateral entry employee might not be thorough without the kind of job activities to be
performed for example a member of committee.

The send doctor servant can go to state for deputation

PRIVATE PUBLIC PARTNERSHIP (PPP)

It is contract between private and public/ govt entity to develop a project with a
common gaol.

2 major things to determine in PPP model that is what is the contract about and what
are the roles.

Just a contract to build something for the government is not PPP, it simply a tendering of
project which comes under the EPC model.

PPP is about when 2 parties come together to develop a project on long term basis. it is
not just about building project and moving on. Also about improving the outcome in any
sector.

For example when PPP model is entered into school sector for many years where the
aim is to improve the education sector in all. If the goal is to improve education then
there can be a PPP to improve the curriculum in the education to establish a long term
goal.

The nature of a contract determines, whether it is a PPP or not. Every contract between
private and public party might not be a PPP.

PPP is a contract where 2 parties decide on a common goal that they want to execute.

Example construction of the train from centre of the city to the Delhi airport not just to
build a train but the goal was to make a fast mode of transportation for the people, thus
it was a PPP.

Role: PPP model both private party and public party sets standards and both have equal
responsibilities. It is not just the government setting standards and private entity
fulfilling it, which happens usually.

PPP model it is di3icult to execute if roles of parties are not clearly defined.

Risk management becomes important in PPP model, which party takes up what sort of
risk in the project.

PPP risks are not easily foreseeable. Example in Highway project there are multiple risks
like land acquisition permissions is the job of the public sector whereas to ensure the
good quality of road is to be taken by the private entity.

Generally public policy risks are taken up by the public authority and other risks are
taken up by the private entities like the engineering and mechanics risk

PPP model is mostly required by underdeveloped or developing countries

PPP model depends on how the contractors written and has the public interests been
fulfilled. It is important that all safeguards by the public authority have been taken into
account and still leaving some place for the private party to contribute its bit.

Fiscal consideration should not be the reason for opting a PPP model. It shouldn’t be
taken up to push fiscal liability on the private entity. As this might lead to political crisis.

It shouldn’t be a mode for the govt/ the public entity to earn money.

Risk on the public o3icers increases in the case of PPP, because if anything goes wrong
the concession agreement it would be their liability and responsibility. So there refrain
from entering into PPP and rather choose a simple transaction like tender.

Many PPP models run into problem of whether the error on the part of the public o3icer
was innocent or was it deliberate to help a private entity.

PPP models are mostly done in democracy, but democracy is very volatile as
government changes frequently and it is hard to put liability on a particular government.

PPP model is good because every time government can't have a di3erent entity bidding
for a project and operating or working on that.

Concession agreement - concession agreement documents the role of both parties in

the PPP. it includes the rewards risks and penalties of both parties.

5 Questions to answer in every PPP model

1. Desired outcome
2. How is it to be achieved
3. How is the risk being shared by the parties
4. What is the revenue sharing arrangement
5. Where did the project run into problem

Role of regulators in PPP

Regulators ensures a healthy environment for PPP model that is a concession

agreement. So that both parties have equal bargaining power. it ensures equal penalties
are imposed on both parties so that none of the party has an upper hand . it acts as a
3rd party which is fair to both parties and the citizens of the country as well.

As certain safeguard clauses in the concession agreement can prevent any future
challenges. example as happened in the Dhabol and Enron power supply case.
Regulator is an entity which vets for the concession agreement. it decides whether the
outcome of the model is good or not. it may also check the viability of a project ie
weather the project is required or not.

Regulator approves the concession agreement, checking whether it is fair to both

parties or not.

Regulator promotes economic growth by bringing e3iciency in both sectors

it acts like an empire or a 3rd party to decide fairness of the concession agreement.

Does there is a need for regular in the PPP model. regulatory system will provide an
oversight to it.

When to use PPP model

Supreme court has held that when govt gives resources mines or telecom to private
entities, it can’t be done without an appropriate provisions for revenue as it is di3erent
from PPP model. Principles of PPP model don’t work on models of resource allocation.
If the resource doesn’t already exist and a project has to be built to create such a
resource then PPP model should be used for example in renewable energy projects.

Problems in the Delhi airport metro case:

Example of a bad PPP where govt went into huge losses as roles were not clearly
defined.
• Tra3ic projection was over estimated construction
• The risks here were reversed and was on the opposite party. Construction risk
has to be on the private entity as it puts the engineering part and operational part
is with the public entity. But here Construction risk was with the public entity.
• The project was completed one year after the speculated time. The private entity
can’t bring in flow of people it is the job of the public authority, which it wasn’t
assigned under the contract.
• Fiscal liability was pushed on to the private entity

Kerela port case:

• It was an international port to drive economic development . it was created as a
transshipment port.
• It was to be achieved by a PPP model
• The private partner had to construct, operate and collect revenue. Whereas
public/govt entity had to do land acquisition, environmental clearance and
ensure connectivity.
• The revenue model was clearly set as 1% will be shared with govt after 15 years
of operation. After that increase 1% each year to max 40%. This 15 years was
given to private party to over their costs
 FINANCIAL REGUALTORS

di3erent scams led to development of Stock Exchange.

market failure in financial sector and government Intervention in response doesn't

always means that it will be beneficial.

Challenges of market failure and government intervention leads to problems. This

requires regulators to ensure. That there is no problem.

Reason of market failure.

1. externalities.

2. Asymmetric information

3. Creation of money-Peculiar to financial sector.

Example people like Harshad Mehta can take loan and create money.

4 Investment- Government is often the investment manager.

Because of these reasons, there is requirement of regulator.

STATES Often rUnout of funds. They then raise money through bonds.

After 2008 satyam scam it lead to some changes.

1. NFRA for CAS

2. Redoing of Companies Act brought legal provisions for keep people
responsibility.

Raju stated I had done fraud deposits in bank. He is showing it on paper.

But banks have issued statement that they did receive money and have money in
accounts. They were falsely creating money on imaginary money.

RBI ensure that banks are not liable for mistakes for mistakes of Raju.

PONZY SCHEME.

• A financial cycle was going on, this cycle continues till flow goes on and
everybody is paying.
• So there was no flow of goods and services but only money. It is flow of credit.
• This is the biggest risk for an economy it mostly happens in semi-rural areas.
• Educated, but not enough to realise that it is a scam.
• It is hard to comprehend. Where it is innovation or just a Ponzy scheme?
• This becomes hard for regulator to make rules as can't go to harsh that hinder
innovation.
• Banking, insurance, corporate finance, short selling, capital market. These all are
innovations.

There are sector regulators in financial market, which regulate a partical market.
Example IRDA, PFRDA.

only regulates pension and insurance.

• There needs to be consumed regulator for consumer redressal.

• There is only Sebi which is for consumer.
• There is gap in consumer regulator which is required for answering the questions
of consumer.
• The companies have better rights slash rules due to regulator but consumer only
has the code for redressal.
• There is also a need for regulator which regulates public debt.
• The credit worthiness of state is more when state borrows the IR in market Goes
high for others, thus the credit is economy reduces and problem for markets.
• To also ensure public debt is used well.
• Also a need for money flow regulator in economy that is amount of currency.
Issued should be regulated. Which RBI in India.

• It depends on how responsible is the government of the country.

• They can't take that of what they may earn on beyond set limits.
• Issuing bonds beyond the limits leads to a problem. If there are too many bones
in market it its value decreases.
 • The RBI repurchases bonds leading excess supply of money because managing
of currency in market is crucial which cannot be left to government and neutral
3rd parties required. That is central bank RBI.
• Financial sector creates a system of regulators in financial sector innovetions
happen really quick.
• Thus important for regulators to not be rigid as it will destroy innovation.
Regulator should be light touch but at some time insure responsible and stable
market.

BANKARUPTCY.

• The company should be allowed to release capital in market to ensure company

is not killed and ensure promoter to stay in business.
• Insolvency and bankruptcy code was made to establish that companies should
be able to legally die bankruptcy allows system to be flexible and allow market to
Determine at what price company will be bought or liquidated.

PFRDA

• There are almost 10,000,000 state government employees.

• This financing the Pension is issue for states or sector which were not going.
• The pension bills was believed to be a huge burden in government.
• Government came with OASIS-old age Report which suggested. The pension bill
would be more. Then salary to employees in future. This was alarming.
• thus government thus wanted to figure out what to do with pension?
• The pension and salary of government employee is coming from taxpayers. That
is money in economy.
• The employee doesn't care where money come from For him it was DB that is
defined benefit Will be received by employee during retirement.
• There was need for restructuring. The pension system in country came with
solution of people will themselves for their pension.
• Came with DC, that is defined contribution.
• They contribute from their salary towards their pension.
• Depending on contribution and circumstances, the pension could be less or
more.
• As this money is invested in market and there might be fluctuations in market,
there money is invested in market and the pension will be based on returns from
market.
• No burden on taxpayers.
• But this received backlash from opposition.
• In 2004 government started this DC with contribution from government and
employee both.
• Employees from 2004 batch also wanted to go to OPS old pension scheme of DB
• that is 2004 batch should receive pension as per OPS.
 • They don't want to pay from their salary as open is also guaranteed 50% pension
but NPS didn't guarantee 50%.
• So in 2013, finally an act came to back the notification of government. There is
act has retrospective application.

Working of PFRDA.

• Pension funds would come in.

• It holds money with Fiduciary rule.
• That's a custodian was set up. This custodian is holder of securities share in
which the funds are invested.
• There can be multiple pension funds.
• Trustee was established. Who would coordinate between the PDFs
• To keep entire system ensuring that there is trust, it is a conscious keeper to
check the entire system.

• Record keeping Agency would Rep out to the PFRDA.

• How the money is being invested? Being kept in PF is to be looked by trust and
trustee.
• As of now employee PF don't report to PFRDA, it reports to Government of India.
 GIFT

• Gateway to connect India to global opportunity

• setup under IFSCA.
• Developed in phased manner.
• Special benefit to banks.
• GFT don't have to file annual return and have a PAN.
• Easy access to Indian capital market.
• This is biggest regulatory experiment in India.
• GIFTs rank 65 in World.
• Initially India had very closed and stringent policies.
• From 1990s came market led policies.
• since then Policies were changing in bits and pieces for this regulator. Was setup
in particular sector to Clarify admin rules.
• The finance moves faster across geography and it thus looks for cheapest place
to begin.

Azadi Bachao andolan case.

- First DTAA loophole found.

- Between India and Mauritius where company used to move to Mauritius to save
taxes.
- Does it was later amended.
- The company setup in Mauritius as it didn't mention of taxing on Slum capital
gain.
- Company were not being taxed in India and Not in Mauritius.
- Round tripping what's happening? Set up in India, send money to Mauritius and
invest in India.

CBTD game came out, that is if it Coming through Mauritius, it will not be valid.

Court said this come out is not valid as negating the tax policy Can't create a come out.

- Money neutral countries setup banking units like Switzerland and exemburg etc.
- Then needed money, so they gave benefit to invest money without any Harsh
Conditions.
- They started O3shore banking unit example Layman for UK.
- Where people should set up just by buying a house and then investing.
 - Japan also set up this. It was a direct Beneficiary of China, Japan became a great
place for Asian economy.
- These places became international cleaning houses.
- India wanted to have in India as it was becoming very expensive for Indian
companies.
- Financial Centre Capable to check Possibilities within law for financial
independence of credit flow.
IFSCA.

- No separate acts.
- Only one act IFSC.
- Any company which works GFT will be governed.
- Common law that is referred to judicial precedents.
- No Insolvency provisions in GIFTs.

Recent issue.

As trump won consumer raise about power with regulatory institutions.

Regulatory authorities are important as they provide certainty to businesses.

Regulators are independent, but government support strengthens them.

1. legal backing,
2. environment in which they are. Why is it important to have regulator?
3. What does they do? Give them space to reinforce their goals.

- It should not overstep its Role.

- Time, mandate and space are important for working of regulation.
- But giving mandate to them becomes problematic to States and giving freebies
becomes di3icult.
- As state always interfere in the standards set by the regulator, which makes
certainty remains a concern for the businesses.
- Regulators give confidence to businesses to invest.

- Example in UP food in india chain fear to invest in the state as their rules keep
changing.

Di3erent models for regulation. Where the regulators are not set up.

1. The regulators are back. The government example, health, education and
many others.
2. Strategy. Regulatory- The existing regulators are asked to take up new rules
and When new sector comes up.
Problems with too many regulator –

Example electricity, coal, petroleum.

There is often a clash among them. Some regulators can be merged.

3. Contract
Eg. Ppp
4. Outsource regulations.
Eg. Advertising standards ASCI

EG. SPORTS ORGANISED.

- The types of regulators depend on the need and the type of sector.
- Sri Lanka is better than Pakistan or Bangladesh is because it is equal to retain its
regulators overtime.