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Showing posts from November, 2018

Is “Excessive Competition” a Problem?

The Finance Minister of India Mr. Arun Jaitley at the National Conference on Public Procurement & Competition Law recently said that, We wanted multiple players because they would ensure the largest consumer interest. But there can be several other impacts. Excessive competition, at times, can result in pricing of a nature that that sector of the economy can itself face stress. Because everybody then tends to follow the leader, and therefore what do you do in such a situation?” “And these are all challenges that will emerge as the economy moves further and expands further. (emphasize added) Is this supposed “excessive competition” a problem? Should Mr. finance minister worry about the stressed entrepreneurs? Let us see. Market and its competition means the entrepreneurs are constantly striving to fulfill the most urgent wants of the consumers. And for that they are constantly innovating about new production technologies and new products. Competition makes sure that...

RBI vs. Government

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The RBI vs. Government battle is intensifying. The Narendra Modi government intends to keep pressing demands for the country’s central bank to relax lending curbs and hand over surplus reserves, amounting to whopping 3.6 lakh crore , even if it risks provoking a resignation by the bank’s governor. After the debacle of demonetization and GST, the Modi government is struggling to handle the economy of India. Modi’s pet projects require huge sums of resources, which only RBI can provide. It is thus important for the Modi government, who is desperate to win the reelection next year, to gain full control of the RBI. This battle has brought some important issues in open that I want to discuss here. Who owns the RBI? RBI’s deputy governor Viral Acharya started this war by saying that undermining central bank independence could be “potentially catastrophic” . The finance minister of India then fired back and since then the pressure is mounting on RBI. In all these back and ...