The Competition Commission of India's attempts to restrict Government control of the market represent a streamlining of India's competition jurisprudence along the lines of international best-practices.
"Capitalism, or more precisely, the free market system, is the most effective way to organise production and distribution that human beings have found ... healthy and competitive financial markets are an extraordinarily effective tool in spreading opportunity and fighting poverty. ...Without vibrant, innovative financial markets, economies would ossify and decline."
Raghuram Rajan's introduction to his much-vaunted book is what developed economies live and swear by.
That being said, India is not a capitalist economy. We are still bound to an extent by socialistic concerns for the deprived and marginalised sections of the market. Even though we are quarter of a century into liberalisation, Govt. protection is nevertheless considered necessary, especially for smaller businesses.
On one hand, we aim to maximise the foreign investment through increased limits of Foreign Direct Investment (FDI); on the other hand we are still worried how the "Mom-and-Pop" stores shall survive when Wal-Mart opens in every nook and corner of the country. In doing so, we are willing to over-look the obvious efficiencies and assured conveniences that such Multi-national brands would bring to the market.
The socialistic concerns lead to adoption of measures which aim to "promote" the smaller or domestic businesses by restricting/limiting competition in the market, even if such "promotion" is at the expense of quality or efficiencies which increased competition would introduce in the market.
All this leads us to the inevitable question: To what extent Govt. intervention should be allowed to dictate the play of market forces in the free-market economy? For instance, is it really maximising consumer benefit to ask the Govt. PSUs to source one-fifth of their requirements from MSMEs? Are we sacrificing the greater good by focussing on the protection of the few?
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This article was originally published on Talking Competition.
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