Published: February 03, 2026
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
