Recently, the central government announced its plan to introduce stricter rules to control interactions between companies. While this comes amid many high-value deals escaping scrutiny due to loopholes, larger government regulations have always kept businesses on edge.

Bringing balance
The words reform and the advent of liberalization of industrial and trade policies, in my opinion, are synonymous with India. During the 1980s, these reforms were accompanied by an increasingly receptive attitude to regulatory reform. The Industrial Policy Resolution 1956 and the Industrial Policy Statement 1991 provide the framework for India’s overall industrial policy to date.

However, most sectors in the business world have suffered from government regulation. Corporations and their representatives often denounce statutory mandates as irrational impediments to economic growth and job creation.

TThere are three major issues today that I can foresee hurting the economic landscape from a regulatory perspective. There is uncertainty about future regulations and laws, especially in the social media industry, tedious tax collection processes for start-ups and insufficient financial incentives for them.

Two big ones
According to the Department of Industrial Development and Domestic Trade (DPIIT), India is home to one of the largest startup ecosystems in the world, with over 70,000 startups in the country.

However, one of the major challenges faced by startups in India is the country’s volatile regulatory environment. Although India has a long history of intra-company transactions that follow the latest trends, the days of “survival of the fittest” are over. Mergers and acquisitions are currently one of the most useful methods of overcoming barriers to entry and improving the development of companies.

Skeptics cannot deny that corporate regulation is an incentive to ensure the security and stability of our economic position. But on the other hand, the entry of foreign companies through mergers and acquisitions seems to have increased the competitive pressure in the domestic market, forcing Indian companies to improve their competitiveness.

In this light, continuous and abrupt regulatory changes may adversely affect the growth of Indian startups. Constant changes in the regulatory climate can be a red flag for investors, who may end up feeling uncertain about their investment decisions due to fear of unexpected surprises.

In a similar way, changes have been made to social networks. The government recently withdrew a controversial personal data protection bill from parliament after the proposed data localization provision drew fierce criticism from various technology and privacy advocates.

While a comprehensive legislative framework is in place to regulate the internet space, including separate laws on data privacy, the overall internet ecosystem, cyber security, telecommunications regulation and the use of non-personal data to drive innovation in the country, we need a bill to fill in the gaps. Privacy experts and tech giants are concerned that the legislation could limit how they manage sensitive information, but give the government broad powers to access it, including exemptions from investigative agencies.

Stakeholders in the social media industry have also raised concerns over the inability to trace the opener under the IT Rules 2021. In the latest draft, the IT Ministry reiterated that resident social media intermediaries should process complaints and dispose of them within a statutory time frame.

These implications, which impose personal liability on chief compliance officers, may affect due diligence requirements and create barriers to entry and ease of doing business. More than 85 percent of social media and online intermediaries currently believe that the stringent compliance rules in the new IT Rules 2021 could adversely affect the ease of doing business in India.

Deeper foundations, deeper impact
It’s smart for businesses to protect themselves against the tide of change. Unpredictable regulatory measures can affect internal operations and unnecessarily reduce time and resources for a company with real potential.

A few practices like investing in a small but effective team incentivized based on their performance, not hiring immediately after funding, but restructuring and assessing your needs and ensuring that different requirements are met from day one can help. They can provide a solid foundation for startups to protect themselves even in a changing landscape.

Government can be a friend to both business and the public, but we lack balance. And without balance, it is very easy to fall into the trap of long-term decline caused by over-regulation.

The need of the hour is forward-looking rules and regulations in line with accepted international standards to enforce data protection and data privacy laws, especially when it comes to personal data, and increase transparency to encourage foreign investors, including FIIs , win their trust.

A clear, comprehensive and well-thought-out framework and rules for new sectors of the economy will not only help businesses by creating a favorable environment for work, but will also give investors confidence in the long term.

The author is Advocate and advocate in the Bombay High Court, working in both judicial and non-judicial proceedings, has skills in negotiation, arbitration and corporate documentation. The views expressed are personal.