India's ambitious economic journey towards becoming a global powerhouse is facing an unexpected and significant internal hurdle. The challenge, as highlighted by commentator Ninad D Sheth, stems not from a lack of entrepreneurial spirit but from a critical weakness in the system's regulatory framework. This deficiency is directly contributing to an increase in the country's risk premium, making investment and growth more costly.
The Core Problem: Regulatory Bottlenecks
At the heart of the issue is the performance of India's regulatory bodies. These institutions, designed to ensure fair play, stability, and investor protection, are often seen as inefficient, slow, and inconsistent. In a dynamic economy now valued at over 4 trillion dollars, such regulatory weakness creates uncertainty. Businesses, both domestic and international, factor this uncertainty into their investment decisions, demanding higher returns to compensate for the perceived risk. This elevated cost of capital is what economists term a higher risk premium.
Ninad D Sheth's analysis, published on 12 January 2026, argues that this environment effectively throttles economic potential. Instead of being facilitators of growth and innovation, weak regulators become inadvertent brakes. The problem manifests in several key areas:
- Delayed approvals and clearances for projects.
- Unpredictable enforcement of rules and regulations.
- A lack of timely intervention in market failures or disputes.
Impact on the $4 Trillion Economy
The consequences of a heightened risk premium are far-reaching for an economy of India's scale. It discourages long-term infrastructure investments, slows down the pace of innovation in critical sectors like technology and manufacturing, and can lead to capital flight during periods of global volatility. For a nation aiming to ascend the global economic ladder, a reputation for regulatory weakness is a severe liability.
This scenario places an unfair burden on India's vibrant entrepreneurial class. Entrepreneurs are left navigating a labyrinth of compliance where the rules are not always clear and the referees are not fully effective. This increases operational costs, diverts focus from core business activities, and stifles the very innovation that drives economic progress.
The Path Forward: Strengthening Governance
The solution lies in a concerted effort to strengthen regulatory governance. This involves more than just creating new rules; it requires a fundamental overhaul of how existing regulations are implemented. Key steps include:
- Empowering regulators with greater autonomy and accountability.
- Leveraging technology for transparent and faster decision-making processes.
- Ensuring consistency and predictability in regulatory actions to build investor trust.
A robust regulatory framework is not an obstacle to growth but its essential foundation. It protects consumers, ensures market integrity, and gives investors the confidence to commit capital for the long term. As India's economy continues to expand, addressing this regulatory gap is not just advisable—it is imperative for sustaining growth and achieving its full economic potential.
