Regulatory Complexity Takes Center Stage for Indian Global Firms
For Indian corporations operating across international borders, managing regulatory complexity has evolved from a peripheral compliance task to a central pillar of corporate strategy. The rapid and continuous changes in rules governing trade, tariffs, environmental standards, labor laws, data privacy, and taxation are now fundamentally shaping business outcomes and financial performance.
Direct Impact on Profit Margins and Market Access
Import restrictions, carbon taxes, anti-dumping duties, government subsidies, and localization requirements are dramatically altering cost structures, market accessibility, and competitive positioning. These regulatory factors directly influence product pricing decisions, profit margin calculations, and capital allocation strategies across industries.
Companies are increasingly integrating regulatory considerations into their core business planning processes rather than treating them as separate compliance exercises. This strategic shift reflects the growing financial impact of regulatory environments on corporate bottom lines.
Tata Steel's Regulatory Cost Burden
Tata Steel's management team, which oversees extensive operations spanning India, the United Kingdom, the European Union, and Canada, recently highlighted this strategic imperative during an earnings discussion. Chief Financial Officer Koushik Chatterjee emphasized that managing regulatory complexity has become a critical strategic requirement across all geographic markets where the company operates.
Chatterjee specifically pointed to Tata Steel's Netherlands operations as a telling example. During the first nine months of fiscal year 2026, the Netherlands unit reported an operating profit of 210 million euros. However, this figure came after absorbing substantial regulatory-related costs: 150 million euros attributed to carbon emission compliance expenses and an additional 50 million euros impact from United States tariff measures.
Without these significant regulatory-linked costs, the operating profit would have exceeded 400 million euros, clearly demonstrating how government policies and regulations are directly weighing on corporate financial performance.
Smaller Players Face Similar Pressures
Smaller and mid-sized Indian companies are confronting comparable regulatory challenges. Jyoti Steel Industries partner Pankaj Chadha explained that rapidly changing international regulations leave businesses with minimal room for strategic maneuvering, often forcing companies to depend on their customers for real-time regulatory intelligence.
Chadha shared a revealing example where a Mexican customer informed him that Japanese steel had become cheaper than Indian steel due to a zero-duty trade arrangement between Japan and Mexico, compared to a substantial 35% import duty applied to Indian steel products.
"Can you believe Japanese steel was cheaper than Indian steel? I had never encountered this situation until that moment," Chadha remarked. "Understanding and incorporating regulatory developments has become an integral part of daily business operations. Our meetings now routinely begin with regulatory discussions." Chadha also serves as chairman of the Engineering Export Promotion Council (EEPC).
The Era of "Regulated Strategy"
Legal experts are observing what they term the beginning of an era of "regulated strategy," where successfully navigating the global legislative maze transforms into a genuine competitive advantage. Ankita Singh, founder of law firm Sarvaank Associates, explains this paradigm shift.
"Regulatory risk has transitioned from being merely a cost center to becoming a critical survival metric," Singh stated. "This evolution is prompting corporate boards to move from traditional 'wait and see' approaches to adopting 'preventive vigilance' models that embed compliance considerations into the very architecture of products and supply chains."
Madhavan Srivatsan, senior partner at Emerald Law, concurs with this assessment. "The days when Indian companies could afford to treat regulatory issues lightly have definitively ended," he observed. "With heightened regulatory scrutiny, mandatory self-reporting obligations, and the risk of substantial penalties, compliance has emerged as one of the most critical corporate functions."
Management Responsibility Escalates
Regulatory responsibility is simultaneously moving upward through management hierarchies. Srivatsan emphasized that "any instance of non-compliance can potentially expose directors to civil and even criminal liability. In certain cases, this liability operates on a strict liability basis where intent becomes irrelevant to the legal consequences."
EU Regulatory Changes Create Mixed Impacts
While conditions have improved somewhat for Tata Steel's Netherlands operations following the European Union's implementation of carbon costs on emission-intensive imports effective January 1, these same regulatory measures have increased costs for India's exports of steel, cement, aluminum, and fertilizer products to the European bloc.
Beginning in June, the European Union will further reduce import quotas while simultaneously raising duties on volumes exceeding those limits from 25% to 50%, creating additional advantages for domestic European producers at the expense of international competitors.
Meanwhile, industry representatives like Pankaj Chadha express hope that India will successfully negotiate a favorable trade agreement with Mexico to address competitive disadvantages created by existing regulatory frameworks.
