Does Regulation Promote Sustainable Development Outcomes? Empirical Evidence from the Indian Electricity Sector
The regulatory environment of India's electricity sector does influence sector outcomes.
There was an expectation that the independent regulatory institutions India had created for its electricity sector would drive the sector along a sustainable trajectory. However, there has been a dearth of empirical studies analyzing the effect of electricity sector regulation on sustainable sector outcomes. We empirically examine whether electricity sector regulation influences the sectoral outcomes at the state level. For analytical purposes, we consider a sample of 12 Indian states (provinces). While we capture electricity sector regulation by constructing a composite index that it connotes as a “regulatory index,” we apply a sustainable development framework that is operationalized through an indicator-based approach to measure the sectoral outcomes. Finally, we employ the panel data estimation technique with a fixed-effect model to establish the relationship between regulation and sectoral outcomes. The results suggest that, while regulation is a crucial determinant of sectoral outcomes in the economic and environmental dimensions, social sector outcomes experience a negative impact. These results have clear policy implications for larger overarching policy questions of energy security and the sustainable development of the sector.