Pitching for more competition, Finance Minister Arun Jaitley today cautioned that pro-business environment without "pro-competition" policies can result in dangerous consequences, including crony capitalism.
"Being pro-business alone is not enough. Being pro-competition is essential to be with pro-business. If you are pro-business without being pro-competition, the consequences could be very dangerous," he said in his annual day lecture of Competition Commission of India.
Citing example of Russia, he said, the country went in for a lot of privatisation without emphasis on pro-competition resulting in creation of oligarchs.
"Oligarchs again meant monopolies. So any pro-business policy per se also has to be pro-competition because without pro-competition, being pro-business itself can encourage oligarchs. It can encourage crony capitalism which itself is dangerous," Jaitley, who is also the Corporate Affairs Minister, said.
With India's transformation from a regulated to a market economy, Jaitley said the government had dual capacity in the context of running enterprises such as BSNL, general insurance companies and LIC.
Then there was the need to have "regulators at arms length from the government... The more we professionalise them better it is for our economy," he said.
Highlighting the importance of competition and its impact on growth, the Finance Minister said, "today world over people have investment and when they choose they never invest in sluggish economy. They want to invest in more competitive economy, they want to invest in a fair economy, they want to invest in an economy where entry and exit is easy, where the rules of business is fair."
With the passage of Bankruptcy and Insolvency Code, easy exit will be facilitated.
"An investor does not want to invest in a jurisdiction where exit is difficult. Therefore, with now proper regime create there would be significant improvement in that area," he noted.
He pointed out that when investment comes in, it becomes the starting point for all economic activities, adding that an economy without investment can never add to its growth.
Citing example of competition providing plethora of choice to customers, Jaitley said advent of e-commerce has provided widest possible choices of goods to the consumers at most competitive prices at the click of a button.
"Competition promotes technology at most reasonable prices, competition will provide quality of services/products to the consumers at competitive prices. It promotes innovation, efficiency and quality," he said.
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To a query on power sector, Jaitley said distribution segment is the real challenge in the sector.
"Old mindset still continues to exists in many states, or in most of them where states are unwilling to let go of the state distribution companies, which are the discoms.
"... Some of the states feel that by not charging the consumers for the services that are provided to him, you earn political brownie points. This has not happened," the Minister said.
He was interacting with the audience after delivering the CCI annual day lecture on 'Competition, Regulator and Growth' here.
Jaitley also said that state discoms is a main contributor to the non-performing assets problem of banks.
"Not creating competition, not allowing user pay principle to apply have both contributed to the aberration which still continues in the power sector. It is a situation where we have more power than we need, have a distribution network but when it reaches states and consumers, the last mile problem remains," he added.
On a query related to the pharmaceutical sector, the Minister said that fake and adulterated drugs is an implementation issue.
"In terms of competition, as far as pharmaceuticals are concerned, they stand on a specific footing. Pharmaceutical is one area where you need innovation and you need to balance that innovation with public health consideration.
"We are an important hub for affordable drugs. We must continue to encourage that but along with innovation the affordability criteria with public health consideration has to be brought in," he noted.
