Improving Product Market Regulation in India

Competition in product markets has been found to be an important determinant of economic performance in developed and developing countries. This paper uses the OECD's indicators of product market regulation (PMR) to assess the extent to which India's regulatory environment is supportive of competition in markets for goods and services. The results indicate that although liberalisation has improved the regulatory environment to international best practices in a few areas, the overall stance of product market regulation is still relatively restrictive. The regulatory environment is also found to vary markedly across the 21 Indian states for which the PMR indicators are estimated. The paper goes on to review various aspects of product market regulation in India and suggest a number of policy initiatives that would improve the degree to which competitive market forces are able to operate. This working Paper relates to the 2007 Economic Survey of India (www.oecd.org/eco/surveys/india).