Government of India Volume I: Analysis and Recommendations

CHAPTER 17
Conclusion
Financial economic policy is implemented by front-line agencies who are assigned functions
by Parliament. The main purpose of financial law is to put these agencies on a
sound footing, with the triad of objectives, powers and accountability mechanisms. The
Commission has focused itself upon this task. The draft Code features substantial improvements
upon present Indian practice in terms of clarity of objectives, precise statement
of enumerated powers, and an array of accountability mechanisms.
The motivation for the establishment of the Commission was rooted in a series of
expert committee reports which identified important difficulties in the prevailing Indian
financial economic policy framework. The Commission has absorbed these areas of concern.
Most of the shortcomings lie in the subordinated legislation, which is drafted by
financial regulatory agencies. The work of the Commission, therefore, does not directly
engage with these problems. The work of the Commission is focused on the incentives in
public administration that shape the drafting and implementation of subordinated legislation.
As a consequence, while the Commission has fully taken cognisance of the policy
problems analysed by the expert committees of the last five years, it does not directly
address them.
The Commission is mindful that over the coming 25 to 30 years, Indian GDP is likely
to become eight times larger than the present level, and is likely to be bigger than the US
GDP of 2012. Over these coming years, there will be substantial changes in the financial
system. The technological change, and the financial products and processes which will
come into play, cannot be envisaged today.
When the proposals of the Commission are enacted by Parliament, they will set in
motion a modified set of incentives in public administration. Clear objectives in law, and
a sound regulation-making process, will improve the quality of subordinated legislation
that is issued by regulatory agencies. The emphasis on legal process in the new laws will
induce improved working of the supervisory process. A common consumer protection
law will clarify the objectives of financial regulatory agencies. These elements will yield a
gradual process of change.
The Commission has endeavoured to draft a body of law that will stand the test of
time. Hence, it has focused on establishing sound financial regulatory agencies, which
will continually reinterpret principles-based laws in the light of contemporary change,
and draft subordinated legislation that serves the needs of the Indian economy. This
subordinated legislation, coupled with the jurisprudence built up at the FSAT and the
Supreme Court, will continually reflect the changing needs of the Indian economy, and
serve the country well in coming decades.
FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION 145