Regulatory unpredictability poses risks to business and investment, says author
According to an Economic Times report, sudden regulatory changes can alter industry economics and impact investor confidence.
Jimeet Modi, Founder and CEO of SAMCO Group, suggests that while regulation is essential to protect consumers and prevent market misuse, unpredictable interventions can harm business viability.
Writing for the Economic Times, Modi notes that sudden changes to economic incentives can affect the earnings potential and long-term attractiveness of entire industries for investors.
The insurance sector serves as an example, where proposed IRDAI changes regarding commissions and distribution practices in September put insurance stocks under pressure.
Modi states that while such moves aim to curb mis-selling and improve transparency, the market may interpret them as an earnings risk for insurers and intermediaries.
Other sectors facing challenges include agriculture, where export restrictions can create uncertainty for exporters, and telecom, where the Adjusted Gross Revenue dispute created financial liabilities.
The author argues that a sound regulatory framework should follow principles of proportionality, predictability, and consultation to ensure consumer protection and commercial viability reinforce each other.