Newsletter February 2026
Published: February 03, 2026
Dear friends,
Greetings from the Centre for
Regulatory Governance.
Faced with a slim purse and yet needing
to do a lot to push the growth agenda, Finance Minister Ms Nirmala
Sitharaman decided to use the opportunity of writing the Union Budget to bring
in a host of reforms based on regulatory principles.
Reading the
annual budget for FY27, it becomes clear that in the tight circumstances, the
Minister has taken a highly unconventional route in an unhappy global
environment. As a personal landmark, the opportunity to present the Budget was
fantastic; this was her ninth Budget speech on the trot. What wasnât pleasant
though were the circumstances which had built up to the Budget day of 1st
February, 2026. She was working within what her Chief Economic Adviser, Dr V
Anantha Nageswaran had described as the paradox of 2025. The Indian state was
driving on all cylinders, one of the reasons why the GDP for FY26 has recorded
a 7.4 percent growth rate. But going ahead that would not be reckoned as
sufficient to take on the international patina of adverse developments.
Her space to
offer tax incentive to make sectors grow at this juncture was zero, the alternative
was to build institutions to make the economy primed for a long term spell of
growth. All these had to be ensued when the global supply chain for minerals,
for technology, for food have all broken down, the trade order has vaporised
and internecine strife among nations have shot up. These all point to one
thing, the collapse of the global regulatory institutions. The discord has also
had an impact at the sub national level, where national level institutions have
shrunk from the regulatory space. They have consequences.
But is the
Budget then the right space to attempt to rectify these? To understand this one
has to understand how the regulators function qua the state.
âRegulation
is one of the most consequential interfaces between the state and the economy.
Regulators provide public goods in the public interest by protecting consumers,
enabling market development, and enforcing rules. In doing so, they exercise
powersâ legislative, executive, and judicialâthat closely resemble those of the
Government itselfâ, notes the Economic Survey. (Page 668)
So when
Minister Sitharaman has outlined her priorities for making growth rise
monotonically and be inclusive enough to deliver results for the people, it is
inevitable that she would turn to the regulatory institutions to do the heavy
lifting. Two evidences of these are
⢠Instituting a system of challenge
round for allocating projects among states instead of, a priori, sealing those
in the budget speech,
⢠Setting up two high power
committees to decide on priorities for the education sector and the banking
sector
For
instance, the Centre will ask regulators to draw up metric to decide which
states will get which project via the challenge round. This puts the premium on
performance instead of lobbying capacity by the states, a welcome
development.
Again, the
setting up the High-Powered committee on employment and enterprise she notes it
will pick up the agenda of making India a leader in services, with a 10 percent
global share by 2047. âThe Committee will prioritise areas to optimise the
potential for growth, employment and exports. They will also assess the impact
of emerging technologies, including AI, on jobs and skill requirements and
propose measures thereofâ. Of the 90 odd paras in Ms Sitharamanâs budget
speech, nearly a quarter are predicated on making the regulators do the heavy
lifting, a sizeable ask.
A detailed
reading of the Budget speech and the Outcome Document shows, she has addressed
most of the key reforms with this formula, thus freeing her up to focus on the
immediate priorities of keeping the fiscal deficit tight, maintain capital
expenditure at high levels and yet push the debt to GDP ratio slide down
towards sustainability.
The
philosophical base of this demand on regulators is provided by the first
âkartavyaâ she spoke about. The aim is to accelerate and sustain economic
growth, by enhancing productivity and competitiveness, and building resilience
to volatile global dynamics. Read this with her emphasis in last yearâs Budget
where she had spoken of the need to redraw the remit of the regulatory bodies.
The government will push reforms through regulations but not conflate those
with budget priorities.
It is in
this context it is heartening to note what the Economic Survey has to say about
promoting the role and capacity of the regulators.
âA
significant gap persists in the availability of human resources capable of
ensuring the efficient functioning of a market economy. While academic
institutions have tailored traditional courses in law, economics, accounting,
and management to address the demands of a market economy, a dedicated,
comprehensive, and structured programme aimed at building regulatory capacity
remains elusive. Consequently, regulators and businesses rely on professionals
trained in conventional disciplines, often requiring extensive adaptationâ.
At the
Centre for Regulatory Governance, we interpret this to mean there is now a
pivotal shift in India's governance: the transition from merely having laws to
mastering the art of regulation. A country's growth is not dependent just
on a bundle of laws, but how they are designed and practiced by the Government,
firms and citizens. This calls for a "regulatory triadâ, where the
Government must ensure accountability and the separation of powers, Corporates
will demand a predictable set of market rules; and Citizens must foster social
trust through self-responsibility to reduce the need for state intervention.
Summary of top Regulatory News in January:
The year
2026 started with Regulators taking more and more concrete steps to address
various issues related to consumers.
⢠FSSAI took decisive steps towards
food safety issues by enforcing mandatory Scientific
evidence related to quality products that hit the markets. This will go a long
way in improving quality of branded food items.
⢠CERC introduced a form of financial
incentives to promote green energy through virtual
PPA norms with the objective of achieving Indiaâs goal of reaching 500
GW of non-fossil fuel capacity by 2030.
⢠SEBI took steps to broaden the market and
improve business by permitting brokers to engage in other related financial
services themselves. On the other hand, it also pushed for stricter compliance for better
investor protection.
⢠The importance of AI in the current
global scenario was well noted in two articles in January - the first one
related to its significance in the Global context and
the second one for the Indian context.
Reforms in the Power sector took
further steps as Government brought a Draft Policy for pushing the Nuclear and
the Green Energy. This comes just after introduction of the SHANTI Bill that we discussed in
detail in December last year
