‘It’s important to articulate a national competition policy’

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: After a long period of a command and control regime, we have started moving towards a market economy. But the reforms in that direction are still incomplete. Not only do controls survive in several areas, but surprisingly there are still policy and legislative initiatives emanating from ministries that would appear anachronistic in today’s policy environment.

At the heart of the market economy lies the principle of free and fair competition. Competition maximizes consumer surplus and offers wider choice and better prices. It improves efficiency, both allocative and productive efficiency, and in both the static and dynamic sense. It pushes enterprises into innovation and as, Schumpeter states, it creates gales of creative destruction.

Liberalisation has contributed to India’s transition from dismal growth rates to the present rate of 9%, among the highest today in the world. After decades of being served sub-standard goods, the Indian consumer is experiencing the benefits of competition in sectors such as automobiles, consumer electronics and durables, telecommunications, insurance, and so on.

Yet unfortunately, reform remains to be completed in important areas, for example coal, oil, gas, banking and posts. Old habits die hard and there is a tendency to retain controls or power of market intervention, as reflected in some recent ministerial proposals such as the Postal Amendment Bill that seeks to give a wide monopoly to the Post Office and impose regulatory controls on private service providers, or the Warehousing Bill that seeks to actually regulate warehousing rates and conditions!

It is important for the government to articulate a National Competition Policy that would set out the broad principles that should be observed by the ministries in articulating economic policies.

Competition in the economy can equally be undermined by anticompetitive practices on the part of enterprises. Such practices are alleged to prevail in some areas e.g. shipping, tyres, cement, timber, even sports.

These can be prevented only through the enforcement of the Competition Act, which is awaiting certain amendments. India is amongst the very few economies today that do not have an active competition law. To enable the economy and the consumer to reap the full benefits of vigorous competition, it is imperative to make the Competition Commission fully functional as early as possible after the Act has been amended.