Restrict Monopoly in Financial Markets, says Rangarajan

The Financial Express, October 17, 2007

Mumbai, Oct 16 Chairman of the Prime Minister’s economic advisory council C Rangarajan has said the tendency of natural monopolies in the financial markets must be restricted. “Natural monopolies are a threat,” Rangarajan said, added creating a creative competitive atmosphere in the financial markets would spur growth.

Talking to FE on the sidelines of a panel discussion on “The political economy of regulation in India” in Mumbai on Tuesday, Rangarajan strongly favoured the existence of various regulators in the country by saying that every regulator has its own importance. Also, he maintained that UK model of having a singular regulator for all the sectors could not be viable for country like India.

“Sectoral regulators are required to facilitate a healthy competition in the market,” he said, and for this basic competitive atmosphere to prevail in the market an effective regulator was essential. “We need a separate public body which would support a healthy competition,” he said, while arguing that India needed to maintain a market-structured competition. However, he made it clear that the regulatory set-up must be transparent and competent too.

He also talked of establishing a relationship between sectoral regulator and competition.

The panel discussion set the stage for the release of a report by CUTS titled, “Competition & Regulation in India, 2007,” by Rangarajan. The report takes stock of how the country has moved forward in promoting growth and equity through regulatory reforms and better management, and what still needs to be done.

RBI deputy governor Rakesh Mohan said on the occasion that there ought to be a commonality in approach by various regulators functioning in the country. “You need to have a rigid approach to see how do the regulators function,” he added.

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