New Delhi, Sept. 28 -- Regulation is not the enemy of a market economy; it is its catalyst. Markets without credible rules do not become 'free.' They become predatory, then illiquid and eventually wither away. India knows what good regulation requires. The Financial Sector Legislative Reforms Commission in 2013 crystallized four essentials: cost-benefit analysis, public consultation, reasoned orders and periodic review.

India's problem is not ignorance of these canons. It is the habits that override them. This week's insurance consultation paper offered a revealing exhibit. The Insurance Regulatory and Development Authority of India (Irdai) proposed segment-wise commission caps, lower expense limits and new disclosure norms. By the close...