B. S. Raghavan
According to a survey conducted by the United Nations Industrial Development Organisation (UNIDO) (published in The Hindu, of July 15), India has been placed in the 41st position in competitiveness among 100 countries, even lower than Thailand, Malta, Mexico and Malaysia. The top 15 are Singapore, Ireland, Switzerland, Japan, Belgium, Sweden, Finland, Germany, Korea, Taiwan, France, the US, Hong Kong, Austria and Slovenia, in that order.
The yardsticks used to measure competitiveness were the ability to produce export quality goods competitively, and make more advanced products, thereby moving into more dynamic areas of export growth, “keeping abreast of changing technologies as well as the intensity of industrialisation, which is the share of manufacturing value added in GDP”.
There are findings of other similar studies as well. For instance, the 2008 World Competitiveness Year Book compiled by the International Institute for Management Development (IIMD), places India in 29th position out of 55 countries in international competitiveness, while the World Economic Forum for 2008 puts India in the 48th among 131 countries.
The World Bank too undertakes periodical evaluations of a like nature. Its current competitiveness rating for India is not available, but some years ago, it placed India in the 40th rank among the 46 countries it had taken up for appraisal.
One of its recently brought out reports, Doing Business in 2007, How to reform, the bank has placed India in the 134th rank among 175 countries in the matter of the number of days it took to get official clearances to start a business in India.
The CUTS Institute for Regulation and Competition, set up under the auspices of the Consumer Unity and Trust Society (CUTS) International, Jaipur, India, under the leadership of its dynamic Secretary-General, **Mr Pradeep S. Mehta, deserves fulsome praise for its innovative efforts to develop, for the first ever time within the country, an India Competition Perception Index to assess the perceptions of a sufficiently large sample of a broad range of stakeholders comprising parliamentarians, officials, regulators, business persons, civil society organisations, academia and media on the status of the competition and regulation regime in the country.
NEGATIVE CHARACTERISTICS
The survey carried out by CUTS in 2007 shows the overall perception index to be 54.67, with varying scores for perception about the level of competition in the market ((58.97), nature of market practices (35.84), awareness/knowledge of competition and regulatory issues (39.39), effectiveness of authorities (43.16) and impact of government policies and measures (47.43).
The lessons to be learnt from these exercises are more important than the figures viewed in isolation and for their own sake. India’s weakest areas are there for all to see: Unpredictability of government policies, infrastructural deficiencies, unsatisfactory corporate and financial management of both private and public sector enterprises, pliant corporate boards, low productivity, undependable quality of the product or service, fitful observance of delivery commitments, inadequate customer orientation, insufficient attention to human development and negligible investment on R&D.
Of course, India has consistently figured among the top 20 countries of the world in the corruption perception index compiled by the Transparency International.
Because of these negative characteristics of the Indian scenario, the economic performance has been unable to capitalise to the required extent on the tremendous advantages the country possesses in terms of democratic polity, a well-established administrative framework, a well-organised educational system, abundance of natural resources, the existence of the world’s second largest reservoir of scientific and technical manpower, skilled and talented workforce, a nationwide grid of institutions encompassing every sphere of economic activity, an independent judiciary and a vigilant media.
It is not that India’s policy-makers and economic players lack mettle and gumption. They have proved it by their impressive contribution to the enormous progress the country has made in the period since liberalisation. It is largely because of their carefully calibrated approach to economic decision-making that India escaped many of the pitfalls faced by advanced economies such as the South Asian meltdown, the gargantuan scams, the sub-prime disaster and the near-collapse of financing and banking institutions.
They have shown great daring by making spectacular acquisitions. They are well on their way to becoming a power to reckon with in their own right.
They have within them the stuff to scale still great heights. Only, they have to develop the skill and the grit to convert challenges into opportunities. This will come about only in the right competitive environment conducive to optimum allocation of available resources and a pronounced increase in customer satisfaction in respect of attention to complaints, the quality and safety of products and after sales service.
It is the flow of this adrenalin of competitive spirit that needs to be stepped up if India has to fulfil all the rosy prophecies about occupying the front rank as an economic giant.
TIRELESS CAMPAIGN
CUTS, and more particularly, its Secretary-General, Mr Pradeep Mehta, Have been waging a relentless campaign through their many educational and awareness programmes to help formulate policies promoting competition, ensure the effective functioning of the institutional mechanisms established for that purpose and mobilise the support of all sections of opinion to further open up the economy and lower the entry barriers.
Due credit must be given to their dedication to the cause over the past many years for the incorporation in the National Common Minimum Programme of the UPA Coalition Government the unambiguous declaration that it “will not support the emergence of any monopoly that only restricts competition. All regulatory institutions will be strengthened to ensure that competition is free and fair. These institutions will be run professionally.”
This was further buttressed by the promise contained in the President’s Address to Parliament on June 7, 2005, that “Competition, both domestic and external, will be deepened across industry with professionally run regulatory institutions.”
For those who wish to understand the whys and wherefores of competition in all its dimensions, the CUTS publication Competition and Regulation in India 2007, must be made compulsory reading. Divided into 12 chapters covering 219 pages, it is a top-class seminal work in its critical-cum-clinical analysis of the issues and in its sweep, scope and depth, made possible by the generous support extended by the UK Foreign and Commonwealth Office.
It goes comprehensively as well as constructively into many areas which had remained obscure so far.
Apart from evolving the Competition Perception Index (which has been referred to earlier in this article), it has come out with a well-conceived set of nine principles (See Box) that should be the sheet anchor of any national competition policy.
INTIMATE CORRELATION
By way of correcting the impression that competition is some kind of academic shibboleth unrelated to real-life needs, the book brings to light the intimate correlation between a purposefully implemented competition policy and the well-being of the people as a whole.
For instance, it refers to a study in Australia which found that the expected benefits from competition-promoting and deregulatory reforms led to an annual increase of 5.5 per cent in GDP, with a substantial part of the gains going to consumers, and rise in real wages, employment and government revenue.
From a similar study for the UK, it was seen that competition policy resulted in large price reductions, innovations and product development.
A research project by the McKinsey Global Institute covering 13 national economies concluded that competition is more important than education, or greater access to capital markets, in boosting the GDP.
There are not very many such systematic inquiries pertaining to developing countries, but Peru’s competition agency experienced in 2000 a six-fold jump in economic benefits, while the Korean Fair Trade Commission in 2003 discovered that the benefits (consumer protection, price decrease, income transfer) outweighed the costs of competition law enforcement by 34 times!
In the light of all the above, it is surprising that India placed a Competition Act on the statute book only in 2003. Even the loop-hole-ridden Monopolies and Restrictive Trade Practices (MRTP) Act, which the new Act replaced, came into being only in 1969.
True to the Government’s penchant for half measures, it is yet to notify the dissolution of the MRTP Commission (ostensibly to give it time to dispose of cases taken up by it). Side by side, the Competition Commission of India (CCI) under the Competition Act, is also in place since October 2003, with an acting Chairman in charge.
The next part of the article will examine the measures necessary to enable the CCI to fulfil the expectations raised by its charter.
Don’t go away.
(To be concluded)
Principles of Competition Policy
Foster competitive neutrality between public and private sector enterprises.
Ensure access to essential facilities.
Facilitate easy moment of goods, services and capital.
Separate policy making, regulation and operational functions.
Ensure free and fair market practices.
Balance competition and intellectual property rights.
Ensure transparent, predictable and participatory regulatory environment.
Explain any deviation from competition principles by means of public statements.
Respect international obligations