Commerce Minister Nirmala Sitharaman and Chief Economic Advisor Arvind Subramanian on Thursday sharply differed in public on free trade policy and the need for competition law in India.
At a national conference on Economics of Competition Law where the two were the key speakers, Sitharaman said India needed a real-time regulator which could effectively check the temptation towards oligarchic practices, monopoly and cartelisation.
Offering his apologies to the minister, Subramanian maintained that regulation should be minimal in a free market economy. “India is moving from one phase to another and the transition is more protracted,” Sitharaman said. In this situation, the country needed a regulator which responded in a more nuanced manner, “so that in the process of transition any temptation to oligarchic practices or monopoly or cartelisation is avoided.”
Subramanian, who shared the dais with her, said, “Trade and competition policies are very, very complimentary. The reason why Singapore does not need a competition policy is that their entire economy is open.”
‘Trade policy best’
“So you do not really need a competition policy. The trade policy is the best way of ensuring competition,” he said. “We have recourse to blunt instruments, bans, restrictions, etc. In the areas of competition policy, I think we need to have... nuanced intervention wherever problems arise," Subramanian said.
Later, Nirmala Sitharaman told reporters that she was pushing for a competition commission which is relevant in India in the present context, rather than saying that “we have a completely free market and we do not need a regulator or need a minimal regulator”. “No, we are yet not in that kind of a situation,” the minister said.
Subramanian also called for making exit norms easier for companies which wanted to wind up their businesses. He said difficult exit norms for businesses were contributing to the banks' bad loans.
“Easy entry and exit norms are both important to promote competition. We have made progress on entry, but are lagging behind on exit,” Subramanian said.
