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Anti-market sentiment behind Govt of India action against Vodafone, Monsanto: Economic Survey

By Our Representative
The Government of India appears to hold the view that it wrongly acted against powerful multinational companies like Vodafone and Monsanto, suggesting that actions against these and other foreign and Indian private sector companies were taken because of “the fear of being seen as favouring the private sector”.
The top policy document, “Economic Survey”, released in Parliament on January 31, suggests that this one of the major reasons why “there remains a niggling sense that India … is not yet following the standard development model.”
Suggesting that too much was being read into the 2G scam, too, the document says, “In telecommunications, the judicially-imposed requirement for transparency and auctioning, while responding importantly and appropriately to the previous experience of corruption, has created a public policy dilemma.”
It insists, “In some cases, it may be socially optimal to sell spectrum at lower-than-auction prices because of the sizable externalities stemming from increased spread of telecommunications services. But the understandable distrust of discretion means that methods other than auctions could be perceived as favouring particular parties.”
Lamenting “abundant caution in bureaucratic decision-making, which favours the status quo”, the document regrets how it fears “of being seen as favouring corporate interests, and hence becoming the target of the referee institutions, the so-called ‘4 Cs’: courts, CVC (Central Vigilance Commission), CBI (Central Bureau of Investigation) and CAG (Comptroller and Auditor General).”
Blaming the “hesitancy to embrace the private sector and to unambiguously protect property rights”, the document, prepared by the Union finance ministry’s chief economic advisor Arvind Subramanian, says, this has happened because “continued reliance on the state to undertake activities that are more appropriately left to the private sector.”
Insisting that “India has distinctly anti-market beliefs” compared to most countries which have experienced economic development, the document says, “The symptoms of this ambivalence toward the private sector” are manifest strongly in “the difficulty of privatizing public enterprises.”

Giving the example of the civil aviation sector, the document says, “Defying history, there is still the commitment to make the perennially unprofitable public sector airline world class”, adding, “Recently, airport privatization has taken the form of awarding management contracts rather than change in ownership.”
Regretting that there is ambivalence towards “private property rights”, too, the document says, “Initially the right to property was inscribed as a ‘fundamental right’ in the Constitution. But during the socialist era the 44th Amendment removed Articles 19 (1) (f) and Article 31 and replaced them with Article 300-A, thereby downgrading property to that of a ‘legal right’.”
Strongly suggesting that adoption of a democratic regime in a poor country could be the main reason for the alleged lack of faith in the private sector and failure to achieve the required growth trajectory, the document says, “Today’s advanced economies achieved their current status … did not begin with universal franchise.”
It says, “Voting rights, narrow and restricted to begin with, expanded slowly over time, a process that helped fiscal and economic development by limiting the initial demands on the state during the period when its capacity was weak.”
Coming to another group of countries, which has seen development more recently, the document says, “The second set of accelerated economic successes mostly in East Asia began authoritarian, explicitly (Korea, China) or de facto (Singapore, Thailand, Taiwan), and gave way to political transformation only after a degree of economic success was achieved.”
“India, on the other hand, has attempted economic development while also granting universal franchise from the very beginning”, the document says, adding, only a “handful of countries”, Botswana, Mauritius, Jamaica, Trinidad and Tobago, and Costa Rica have been “perennial democracies” like India.

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