to Indian economy and policy making. In this firms can
enter with ease
but cant exit due to legislations, political compulsions.
The market economy
requires unrestricted entry for new ideas, firms so that
resources can be
allocated to efficient uses and at the same time exit
should also be allowed so
that resources can be taken away from inefficient firms.
has moved from
socialism with restricted entry to marketism without
exit in India is demonstrated from the fact that the most
are only 1.5 times larger than newer plants. This number
is worrying as the
most successful plants would have competed longer and
dominated their peers and
gained a market share. In the US this is 40 times and in
Mexico 2 times.
are many sick and inefficient firms in India that should
not survive are
run due to more number of employees in them.
Cost of impeded
1.Fiscal costs: The
government provides subsidies like
bailouts and loans for inefficient firms so that they can
continue. This puts a
cost on the exchequer.
costs: the allocation of resources to
inefficient firms leads to economic cost in a capital
starved country like
India. The bad assets continue on the books of banks and
reduce flow to new
investment dampening growth.
costs: the benefits given to inefficient
industries go to the rich who own them. The willful
defaulters too are aided by
this and it can cost the economy.
making by enabling public servants to decide freely and
mechanisms like CBI, CVC and courts impede decision
and capacity building needed for imparting specialized
knowledge to make decisions.
provisions in the Anti corruption act viz. if a public
servant through his decision causes gain to another
party it is an offence. Hence even honest mistakes can
is a need to examine whether the vigilance officers to
are able to achieve the objective.
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