24/08/2020 - Economy | Mainstorming

IAS Parliament 4 years

KEY POINTS

· There is an urgent need for deeper and long-term economic reforms which can, inter alia, enhance competitiveness by eliminating distortionary market practices to usher economic growth across sectors.

· India has failed to introduce a culture of fair competition in our markets, an essential ingredient for the success of a free-market economy.

· The 1991 reforms introduced the concept of “free markets” to India. They were aimed to gear up the economy to face competition from within as well as outside. This brought competition into the Indian markets, and the benefits, both in terms of faster economic growth and consumer welfare, are clearly visible.

· It is time for India to have a National National Competition Policy (NCP). Competition policy refers to “those government measures that directly affect the behaviour of enterprises and the structure of industry” to maximise total welfare, i.e., the total of consumer’s surplus and producer’s surplus, as well as taxes collected by the government.

· However, to be effective in a democracy, such policies should have the cover of the law. The Competition Act, 2002 (Act) which replaced the archaic MRTP Act, 1969 already exists to provide the statutory cover for the NCP.

· Control of anti-competitive agreements and prevention of abuse of dominant positions by large enterprises, regulation of combinations and competition advocacy are broad thrust areas under the Act.

· Similarly, public procurement, which constitutes approximately 20-30% of our GDP, continues to be infested with cartelisation. NCP will ensure each policy regulation and law is screened based on impact, if any, on the state of competition. However, this requires a strong political will.

· Recently announced initiatives to introduce limited privatisation of Indian Railways for select routes for passenger train services indicates growing realisation of the importance of introducing competition in the public sector.