CEA Nageswaran cautions against overregulation, calls for a balance with growth
- Speaking at the CII Global Economic Policy Forum, Nageswaran said while Indian regulators have focused on ensuring that no act of deviant behaviour goes unpunished, in the current context of uncertain global economic outcomes and premium growth, regulators must reflect on what they should optimize.
New Delhi: Chief economic adviser V. Anantha Nageswaran on Wednesday cautioned against overregulation and said the right blance needed to struck between optimizing growth and the regulatory framework in light of global uncertainties.
He also called for drawing a distinction between regulation in the financial and non-financial sectors.
Speaking at the CII Global Economic Policy Forum, Nageswaran said while Indian regulators have focused on ensuring that no “deviant behaviour” goes unpunished, in the current context of uncertain global economic outcomes and premium growth, regulators must reflect on what they should optimize, rather than maximize.
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"In our country, we have focused more on making sure that not a single act of deviant behaviour goes unpunished. And that is something that we need to reflect on," he said.
"Therefore, what is it that the regulator has to optimize rather than maximize in this case? And that is the question that regulators have to ask themselves," he added.
Competition determines role
Nageswaran said that in the non-financial sector, except for natural utilities where regulation is needed to protect customer interests, competition and market forces largely determine the role of regulators.
"You (regulators in non-financial sectors) can expect competition to take care of much of the roles that regulators are expected to perform. So, as long as you create a competitive environment as close to the theoretical perfect competition, you are fine," he said.
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“But in financial matters, the only reason regulators have a natural tendency to lean, subconsciously or unconsciously, towards what you may consider as excessive regulation is because of two things: the effects are systemic or not sectoral, and two, when things go wrong, it is the state that is expected to bail out the overall economy.”
Push for self-policing
In July, Mint reported that India's banking and capital market regulators are increasingly pushing for self-policing by financial sector entities and market participants to ensure they check malpractices themselves before things get out of hand.
To be sure, the Reserve Bank of India (RBI) has been pushing fintechs towards self-regulation, and holding discussions both in private and in groups with heads of banks, non-banks and even asset turnaround companies on governance and other regulatory issues.
The markets regulator, the Securities and Exchange Board of India (Sebi), has also urged the industry to proactively report on mischief in the market to maintain investors’ trust.
"I think, I should lean towards one side when it comes to non-financial sectors in terms of encouraging innovation, letting competition play the role of regulator and the marketplace," Nageswaran said.
"But when it comes to finance, the question becomes that much more nuanced," he added.
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Business NewsEconomyCEA Nageswaran cautions against overregulation, calls for a balance with growth
First Published:11 Dec 2024, 07:03 PM IST
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