Review of Market Integration

Few aspects of economic policy elicit more conflicting opinions than the role of bureaucracy in policy making and implementation. These range from Max Weber’s picture of a rule-governed efficient institution to the ‘Yes, Minister’ caricature of one bound in complex red tape, operating inefficiently and serving the interests of its own officials. In this article, I attempt a better understanding guided by the economics of incentives and organisations. I emphasise the multidimensional complexity of government bureaucracies—they are answerable to multiple political principals, must handle multiple tasks, have multiple levels of hierarchy and so on—and suggest some institutional and organisational reforms that seem relevant for India and other less-developed countries that wish to sustain growth and progress to and beyond a middle-income level.

The article reviews and draws lessons from the experience of fast growing economies including a sub-set of these termed High Growth Economies (HGEs) with a decadal rate of over 7 per cent. It then reviews the history of the Indian growth acceleration following the reforms of the 1990s and its future prospects given the recent slowdown. It analysis the potential dangers and reasons for India’s growth slowdown and proposes policy reforms for sustaining fast growth.

Government’s land acquisition has come increasingly under fire from both the courts and the people whose lands are being acquired. This article argues that the way land is being acquired in India is contrary to the principles that govern a market-based society. It shows the close similarities in how land was acquired in two examples, one in USA and one in India. Both had implications for how the practice of land acquisition has evolved. The article also suggests a method of resolving the problem.

The recent Telecom Regulatory Authority of India (TRAI) norms on mergers and acquisitions (M&A) create a two-pronged upper bound for the merged entity based on spectrum share and market share. The spectrum share, defined in terms of share of second generation (2G) spectrum held, is set at a low level (25 per cent) and the market share at a high level (60 per cent). This severely restricts the M&A transactions possible, and also ignores the fact that since each subscriber is increasingly being serviced using a combination of 2G and third generation (3G) technologies, the definition of spectrum share cannot merely be restricted to 2G spectrum. Further, given the convergence of the computing and telecommunications industries and the creation of value networks of devices, service providers and applications to provide a seamless computing, telecommunications and entertainment interface to the consumer, one has to look at regulating the market power of networks rather than of industry silos. This article details the implications of the TRAI approach and shows the need for a new framework of regulation.