The fact that there is a need to define boundaries of business is not a contested issue. In any civilized society, rules are needed so that no stake-holder can harm the interest of another to further its interest. A state, therefore, takes note of it and frames legal boundaries to preserve the freedom of its citizens and entities. This ensures that everybody is free to enjoy his or her freedom without infringing the freedom of another. The role of regulation in this context is purely promotional and enabling.

However, a multiplicity of regulations and far too diverse controls can also harm instead of promoting the cause of free growth. Business is one example that immediately leaps into mind. Globally, in all countries, regulation tends to grow with a crisis. No regulation can be foolproof. And there is a natural inclination to find the loopholes in any regulation to further the interest of the business. And the authorities keep trying to plug the loopholes by expanding the ambit of control.

We all understand this. Then there is the case of multiple regulatory bodies converging into controlling businesses. This necessarily tends to create confusion about the operational space of the regulatory body concerned. There are cases where the boundary of control of one body ends, control of the other starts. But between the boundaries lies a grey space that tends to be undefined in the rule-books.

Globally, such cases abound and have created disastrous consequences with markets crumbling, regulators scrambling to plug loopholes to prevent similar disasters from happening again. In every such case, while common sense cried for simpler and clear rules, the reverse has happened.

Simply translated, it means the creation of layers of licensing and compliance. While too lax a regime may lead to an anarchic market situation, too tight and layered licensing and complex compliance environment may also harm business initiative. A layered regulatory environment makes business operations expensive. It’s so because any business strategy in such an environment needs to evolve through layered bureaucracy internally. Each stage of strategy would then require checking for multiple licensing syncing.

While an older business that has grown through the process, will have an expensive but experienced bureaucracy to deal with the system, it will act as a deterrent for a new enterprise to come up. While for the former it will add to the cost of production, for the later it will add to the cost of setting up the business itself thus acting as a deterrent to the growth of business in the country concerned.

Therefore a country should strive for a simple but effective regulatory environment. An ideal environment, therefore, should be one that has zero tolerance for malpractice but is positively encouraging for growth instead of acting as a shackle.