ABSTRACT
Regulation is a quintessential government activity that puts the coercive power of the state in service of the public interest. Because government regulation is backed by coercive action and concentrates power in public organizations over private organizations participating in the market economy, it is subject to dysfunctions. These dysfunctions could result from either too little regulation or too much regulation. For example, the rapid economic growth in India during the 1990s was stimulated in part by loosening the grip of state regulations, a system of regulations inherited from the British and disparagingly referred to as “license-quota-permit raj [or rule]” or “license raj” (Sinha 2010: 461). Regulatory regimes like the license-quota-permit raj create opportunities for corruption, and even incremental steps that shine the light of transparency (leaving aside deregulation) have positive effects such as increased small business activity (Pandey 2012). More importantly, the heavy hand of regulation undermines market dynamism and stifles growth and its attendant benefits (see Majumdar 2004).
