How much pain in tackling global inflation; Disgorgement orders by SEBI; Evaluating regulators

How painful will it be to fight global inflation

There is shock and awe about the pace at which the US Fed has been tightening. Many are concerned about the extent to which the US Fed might end up inflicting a recession in the US, or difficulties all over the world, as they race to solve the US inflation crisis.

In my column in the Business Standard today, Stopping the inflation, I show three arguments that could result in DM inflation control at a more modest cost.

Disgorgement orders by SEBI

It seems intuitive to think that when someone has violated financial regulations, the penalty should involve forcing the `disgorgement’ of the ill-gotten gains from the culprit, and recompensing the losses of the victims. In recent years, SEBI has come out with many `disgorgement’ orders.

In new research, Renuka Sane and S. Vivek analyse SEBI disgorgement orders [paper, summary]. They find that this field suffers from conceptual and practical problems. While disgorgement might be an attractive tool, much care is required in setting up the legal theory and sound implementation machinery. As I read their work, I also saw limitations in the treatment of disgorgement in the draft Indian Financial Code, version 1.1.

Evaluating regulators

Regulators in India are unique `mini-states’ which cut through the separation of powers doctrine, and fuse the three branches of the state. They are the canonical problems of the Indian administrative state.

One element of the checks and balances surrounding these organisations lies in formal evaluations of their functioning. In a column in the Business Standard on 20 June, K. P. Krishnan describes how such evaluations can be done, and the Indian experience in evaluating the performance of regulators.