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Part - V

Naturally, the latter requires implementation of long-term positive policies that are relatively difficult to sustain given the framework of electoral polity in India that encourages short-term maximization of one's "payoff". Having said that, it is also to be noted that the former is equally, if not more, critical in propelling the economy towards a market-friendlier one and boosting consumer confidence. Each of these is separately examined below.

The Government as a protector of market efficiency

An important aspect of market efficiency lies in recognizing the criticality of information in the present day Indian market. Informational equity plays a key role in fostering confidence of the players in the system. However, with a fractured polity, it is easier said than done! The main impediment to this is inherent in the very nature of the democratic framework that the economy is "constrained" to work in. With coalition politics becoming the norm of the day, the importance of pushing through a policy is often given less priority over aligning the ideologies of a multi-party system. The victim, as expected, happens to be the market. A current example of this is the fiasco over the Conditional Access System (CAS). A lack of firmness in the public policy regarding CAS results in the "negative multiplier" affecting all segments of the market. A customer who is not sure what to expect is not prepared to invest in a Set-top box. A dealer of such instruments as a result sits on her idle inventory. A handful of cable operators who bought these find a significant proportion of their working capital getting tied up. Finally a corporate house remains undecided over the planning of its advertising budget when it is unsure about the channels that the market is going to watch if the system gets implemented! It is ironical that while the motive behind the change was to bring in higher levels of service delivery, thereby assisting the consumers, the cost associated with it is hardly absorbed.

Another impediment to market efficiency is "state-sponsored" corruption. Why it is worse than any other form of corruption is because theory supports that the "invisible hand" of the market is a stricter administrator than the Government when it comes to eliminating malpractices. Having said that, one must also admit that the post-liberalization era (ushered in by the VDIS) and the perceived reduction in the interference of the Government in market functioning, have made more and more corporate houses acknowledge a withering away of the "rent-seeking" atmosphere that encouraged monopolistic maneuvers in a pseudo-market environment.

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*Contributed by -
Suchintan Chatterjee,
Post Graduate Diploma in Computer Aided Managemnet (PGDCM),
IIM Calcutta.