Q. Critically analyze the consequences of increased concentration of wealth and economic power in Indian big business on economic growth, competition, and democratic institutions. How can the Indian state strike a balance between promoting business growth and ensuring fair competition and inclusive development? (250 words, 15 Marks)

July 17, 2023 23

GS Paper III Indian Economy

Answer:

Approach:

Introduction: Begin by acknowledging the trend of increasing concentration of wealth and economic power in big businesses in India, explaining its significance and introducing its potential impacts.
Body:
- Discuss the consequences of this trend on economic growth, competition, and democratic institutions.
- Examine the implications of these consequences, especially focusing on the socioeconomic disparities and the potential undermining of democratic values.
- Suggest ways through which the Indian state can strike a balance between promoting business growth and ensuring fair competition and inclusive development.
Conclusion: Conclude with a reaffirmation of the crucial role of the Indian state in managing this balance.

Introduction:

The Indian economy has seen a trend towards the increased concentration of wealth and economic power in a handful of big businesses. This has sparked a wide-ranging debate on its impact on economic growth, competition, and democratic institutions.

Body:

On one hand, these large conglomerates contribute significantly to India’s GDP and employment.

For instance, the Tata Group alone has over 100 operating companies and provides direct and indirect employment to over a million people.

Further, the concentration of economic power has led to substantial investment in R&D and innovation, providing a boost to the Indian economy.

However, on the other hand, such concentration can stifle competition, create barriers to entry for smaller firms, and potentially lead to monopolistic practices.

As per Oxfam’s report (2020), India’s richest 1% hold more than four times the wealth held by 953 million people who make up the bottom 70% of the country’s population. This immense wealth disparity raises questions of equitable growth and inclusive development.

Further, this concentration of economic power can potentially impact democratic institutions. There could be a risk of these conglomerates exerting:

undue influence over political processes,
policy-making, and regulatory decisions, undermining the democratic ethos of the country.

To strike a balance, the Indian state could:

Strengthen Competition Policies:
- Ensuring a robust competition policy, and empowering the Competition Commission of India can help keep monopolistic tendencies in check.
Promote MSMEs:
- Policies to support MSMEs, such as easy access to credit, can ensure they serve as a counterbalance to big businesses.
Transparency and Accountability:
- Mandating transparency in political contributions can prevent undue influence of big businesses in politics.
Progressive Taxation:
- Implementing progressive taxation can help redistribute wealth and reduce inequality.
Enhanced Corporate Governance:
- Strengthening norms related to corporate governance can ensure businesses operate in an ethical and socially responsible manner.
Inclusive Growth Policies:
- Implementing policies focusing on inclusive growth can help ensure the benefits of economic growth reach all sections of society.

Conclusion:

The Indian state, thus, has a pivotal role to play in maintaining a balance between promoting business growth and ensuring fair competition and inclusive development. A dynamic, robust regulatory framework coupled with inclusive growth policies would go a long way in ensuring this balance.