Economic Issue Concentration of Economic Power

India has been experiencing growing concentration in business power of a few monopoly houses -- Indian and foreign. The growing concentration, however, is not reflected in the net assets. The phenomenon of growing concentration in private hands can be understood better through a study of sales turnover as a measure of business power. It seems that product monopolies are getting built in a number of common consumer products; and the entry of smaller manufactures is becoming more and more difficult. The financial strength of the existing MNCs and new entrants is a key factor in this process. New product monopolies are also getting established through the commercial licensing and franchise mechanism of the MNCs. It is natural that small enterprises would find it safer and more secure to enter into long term contracts for exclusive sale agreements. In such contracts large corporations take up the responsibility to market products of the small scale sector under their own banner and trade name. For instance, Dalda, a hydrogenated vegetable oil, is manufactured by many a small independent enterprise but strictly according to the specifications, packaging and other norms of production as given by the Levers. The practice of such sub-contracting is quite common and widespread in the pharmaceutical industry of India. This is true of both Indian and foreign companies. For instance, the fast growing Ayurvedic medicine producer, the Dabur, is having a multiple of sub-contractors to provide products marketed by them. Colgate, Singer, Bata, Ciba-Geigy, ITC, Gillette, Ponds, Reckitt & Colman, Godrej and Batliboi are just few other instances for this phenomenon. The growing concentration of business power, when measured in terms of overall sales or product-wise sales, indicates the capacity of the few to influence price structure so as to reap a high monopoly rent.

Understanding Monopoly : Government Measures to Control Monopoly in India

In the sixties, the problem of growth of monopoly power drew particular attention. The Government appointed the Monopolies Inquiry Commission in May, 1964, under the chairmanship of Justice K. C. Dasgupta. Its task was to enquire into the existence and effect of concentration of economic power in the organized private sector. It excluded the public sector and agriculture from the purview of its study. It investigated cases of 'product -wise concentration' and inter-industry

concentration. Planning in India concentration of economic power.

is

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But curiously with the progress of planning in India, it was realised, that there was growing concentration of wealth and economic power in fewer hands. The benefits of economic growth did not percolate to the poor. In the agricultural sector it was cornered by the big landlords. In the industrial sector also it were the big industrialists who benefited. We thus failed to achieve economic growth with justice, so enthusiastically enshrined in the Directive Principles of the Indian Constitution. Economic power gets concentrated through the monopolistic and restrictive trade practices. "Monopolistic practice includes every practice whether it is by action or understanding or agreement, formal or informal, to which persons enjoying monopoly power resort in exercise of the same to reap the benefits of that power and every action, understanding or agreement tending to or calculated to preserve, increase or consolidate such power. Restrictive practice refers to "practices other than those pursued by monopolists which abstract the free play of competitive forces, impede the free flow of capital or resources into the stream of production or of the finished goods in the stream of distribution at any point before they reach the hands of the ultimate consumers." According to the commission, (a) controls and licenses have played a major part in the creation and growth of monopolies, (b) Big business has advantages over the smaller businesses in securing financial accommodation. It enjoys many economies of scale- "Big business by its very bigness sometimes succeeds in keeping out competition." (c) Intercorporate investment of funds and interlocking of directors wasanother factor, (d) Foreign collaboration also helped big business rather than small business. Evils of Monopoly in India : The growth of monopoly power has the following evils : (a) It was disadvantageous to the weaker sections. (b) As development proceeds, the initial monopolies have more of an absorbing than spread effects. (c) Economic disparity which arises due to undue concentration of economic power "affects economic growth itself in the long; run and

inhibits it, for such growth is not sufficiently widespread to be selfgenerating'. (d) Monopoly leads to the growth of inequalities. (e) It has the power to corrupt. (f) It can influence economic decisions of the government. Since big business controls the press, it can influence the public world opinion as well to its favour. (g) Monopoly is also responsible for misdirection of resources. The Monopoly Inquiry Commission, however, failed to comprehend the nature of the concentration problem in its proper perspective. While commenting on the economic consequence of concentration, it held that such concentration fostered economic growth. It led to increased capital formation. It was also responsible for the development of managerial skill. Big business has also succeeded in attracting foreign collaboration. "Thus monopolies have become the engines as well as consequences of growth." Government Measures to Control Monopoly in India: The M.I.C. pointed out that there is a circular relationship between monopoly and development, each appearing as a cause and effect of the other. Thus a vicious circle is being formed. It is a circle without an opening. It is a growing circle. If left to itself it has a cumulative effect. The state therefore has taken a number of measures to control the growth and exercise of monopoly power in India 1. The Monopolies Restrictive Trade Practices (MRTP) Act : On the basis of the recommendations of the Monopoly Inquiry Commission the MRTP Act was passed which came into force from June, 1970. The provisions of the Act came to be divided in three groups, namely, (a) provisions relating to concentration of economic power, (6) those relating to monopolistic trade practices and (c) those relating to restrictive trade practices. The Act provided for the establishment of a permanent statutory Monopolies and Restrictive Trade Practices Commission, which started functioning since 1970.

The Act provides for strict surveillance of the large business houses. They most seek governments permission for expansion, for merger, amalgamation or for starting a new undertakings. The Act also requires all collective and bilateral agreements relating to restrictive trade practices to be registered with the Registrar of Restrictive Trade Agreements. Such restrictive practices include collusive tendering, collective price fixing, withholding or restricting of output, collective boycott, tie-up sale, price discrimination, exclusive dealing, predatory pricing, restrictions on manufacturing process, etc. In foreign countries like France, Canada, West Germany, etc, public sector bodies come under the purview of restrictive trade practices. But in India public sector bodies are outside the regulatory provisions. The MRTP Amendment Bill 1983 seeks to protect consumer not only from restrictive trade practices but also from unfair or unethical practices like misleading advertisements. Other measures to curb the growth of monopoly power in India are the following : 1. Enactment of Foreign Exchange Regulation Act (FERA) 1973. 2. The expansion of the public sector particularly in infrastructure and in basic and heavy industries. 3. Vigorous promotion of village and small industries. 4. Regulation of flow of financial resources to the private sector from the public financial institutions. 6. Development of the co-operative sector. 7. Price regulation and regulation of distribution Sometimes it is argued that the top 20 monopoly houses should be nationalized, if we desire a cure for the monopoly problem permanently. Here we should remember that an important feature of planning in India is the acceptance of the concept of mixed economy. In a mixed economy the public and private sectors coexist and contribute to the fulfillment of the planned objectives. The Industrial Policy allows the private sector to develop in relation with the targets and objectives of national plans and policies.

At present there are innumerable instruments with the Government to regulate and control the activities of the private sector, so as to prevent the growth of monopolistic tendencies. The Government therefore has rightly declared that it has no intention of nationalizing the top 20 monopoly houses. But then, the various instruments available with the Government for controlling monopoly should be sincerely and effectively utilised.

Balanced Regional Development in India

The development of every area in a country is desirable. The development of areas leads to the prosperity of the people and proper use of material resources. In India, wide regional disparities existed at the time of independence. The foreign rules did not think of spreading the benefits of economic development to everyone. The Government of India, after independence, has been laying emphasis on the balanced regional development of the country. Various industrial policy statements and five year plans emphasized the development of all regions in a planned way. No country can afford to allow disparities in development to persist. So steps should be taken to develop all the areas in a uniform way. Balanced regional development implies uniform distribution of planned investment among different regions of the country. The investments should be so planned that regional growth rates should be equal. Some regions are more developed than others. To develop underdeveloped areas, the rate of growth should be more at those places so that disparities are removed. So balanced regional development means the economic development of all regions raising per capital income and standard of living of the people by exploring natural and human resources.

The concept of regional development is based on the development of specific regions. It is generally undertaken where Regional differences exist and where a particular is to be developed (Ninth Five Year Plan, p.

17). Regional Development is carried through the regional planning which is a technique to evaluate the potential of sub-natural areas and to develop them to the best advantages of the nation as a whole (Misra, R.P., 1992, p.57). Like the national planning the regional planning also has the objective of accelerating the process of social advancement of the community through the technique of economic and social planning, though it is restricted to the given region <}r area of the country. The major objective of the regional development is to remove regional disparities in respect of economic and social development and bring out the region at par with other regions of the country. It is a significant means to remove regional backwardness, meet regional aspirations and demands, make optimum and judicious use of regional resources, solve regional problems and involve local people in plan formulation and implementation. It may also help in conserving the environment and cultural heritage of a particular region. The planning for regional development involves identifying the regionalism present, demarcating the region, determining the need of the region, formulating the plan, implementing the plan within the framework of government set up and reviewing the implementation of the plan (Misra, R.P.,1992). Such planning should also take into account the problems to be tackled, objectives of the planning, availability of the resources, policy alternatives and their impacts, type of investment needed, cost of planning, planning priorities, design and layout, policy decision and the implementing authority. Regional development has two dimensions, i.e., (i) conceptual base, and (ii) implementation of development plans and policies. The need for regional development was felt since the beginning of the planning era in the country. That is why during the first and second five-year plans special attention was given to develop backward areas. A number of new industrial centers were located in backward areas to provide boost up to the regional economy and create employment opportunities for local people. During the Third Five Year Plan it was decided to accelerate the industrial and agricultural activities on the regional basis to achieve the goal of balanced regional development. But at the end of the plan it was realized that there has not been considerable progress in realizing the objective of balanced regional development.

The Fourth Five Year Plan marks a watershed in Indian planning, as it spelt out, for the first time, some distinct regional policies and took certain concrete steps towards balanced regional development. Since the Fourth Plan it was realized that in order to reach the social and economic goals of development, a greater diffusion and growth of activity and employment at local levels would be needed. Hence, some attempts were made to decentralize the planning process to the sub- national and sub-state levels. This change may be seen as a shift towards more enlightened approach to the understanding of regional problems, assesflment of local and regional needs and initiation programmes that may benefit local areas or ergot. Another compulsion which stimulated iflgional thinking at this time was the great concern the widening interregional disparities in the country For instance, during the decade between 1960 an! 1970, the difference in per capita net domestic product among states had increased from 1.9; 1.0 to 2.fl 1.0. Such vast regional disparities in the country had their political repercussions in some areas, which brought the problem of backward areas into sharp focus. Among the backward areas, the need to accelerate development of areas inhabited by certain social groups like the tribal's, who had been bypassed during the development process, had become a priority issue. Simultaneously the need was felt forB directing effort towards building elements of special I assistance to small and marginal farmers and agri-B cultural labourers in the area development programmers. These considerations led to the evolution I of a definite "target area" and "target group" approach in planning, which must be seen as important I developments since the Fourth Plan (Sundaram, I 1978, pp.73-74). Therefore, in the Fourth Plan measures were initiated to consider backward regions in I the allocation of financial assistance to the states, (ii) I to install central projects in the backward areas, (iii) I to make provision of financial support to medium I and small industries in the backward areas, and (iv) to provide special financial assistance to small and 1 marginal farmers and agricultural labourers in rural areas. The measures introduced during the Fourth Plan have been continued and even enlarged during the Fifth Plan. During the Sixth Plan programmes of technology up gradation and technology transfer were initiated to strengthen the resource base of the region. Presently the concept is to develop the backward regions as an integral part of the overall planning process.

The salient features of the policy/ programme which are guiding regional development include: (1) An interregional allocation policy tilted in favour of backward States, (2) An incentive policy designed to attract investments in industrially backward regions and areas, (3) A sub-plan approach for some special problem areas to ensure that investments from the state and Central sectors flow to such areas in a coordinated manner to undertake programme and schemes specially designed to their interests and needs, and (4) A social justice approach towards provision of minimum needs so that the disadvantaged areas may achieve parity in items of social consumption.