GS3 (Indian economy)
In economic debates people have an uncritical faith in the market or are completely averse to it. But there is a deep complementarity between market efficiency and state action. Comment on this w.r.t the current Indian economy.
Best answer
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Uncritical faith in the market could result in a situation like the 2008 global economic crisis when the US markets operated almost unregulated. Being completely averse to market as was reminiscent of India’s pre-1991 days also is unhealthy as it creates economic stagnation.
India discovered the complementary balance between the two after the LPG reforms of 1991.
1) Under SEBI’s regulation the Indian stock market is the largest in the world in terms of the number of listen companies.
2) Competition Commission’s anti-monopoly action has led to healthy competition which improves consumer choice and creates a fair playing field for business.
3) By placing strategic FDI limits for different sectors all the stakeholders are mutually benefitted. Allowing 100 FDI in defence only when critical technology is brought in creates competitive investment .
4) In the absence of the newly passed Bankruptcy code disputes would have dragged on interminably.
5)By allowing full current account convertibility and only partial Capital account convertibility economic volatility is prevented.
Market forces act in favour of profit and state action tempers the drive for profit with meeting public purpose and overall stability as has been amply illustrated in India through the years.
