NEW DELHI: “Needless” market interventions by the government have a way of becoming counter-productive to the intended objective, the Economic Survey warned, going on to suggest that “each department and ministry… must systematically examine areas where the government needlessly intervenes and undermines markets”.
Chief Economic Adviser K Subramanian listed four examples of such failures: the “anachronistic” Essential Commodities Act (ECA), Drug Price Control Orders, foodgrain markets and debt waivers.
“The Indian economy is replete with examples where government intervenes even if there is no risk of market failure, and in fact, in some instances its intervention has created market failures,” the Survey noted.
Subramanian was sharply critical of the ECA, holding that with agricultural markets becoming more integrated and competitive, “the utility of the Act is dubious”.
The ECA controls the production, supply and distribution of vegetables, pulses, edible oils, sugar etc., which are treated as essential commodities.
The ECA is ineffective at controlling prices, Survey notes.