NEW DELHI: Despite impressive progress in enabling competitive markets, pro-crony has destroyed value in the economy, noted the Economic Survey 2020. In order to become a $5 trillion economy, India must wean away from pro-crony policies, it added.
The Survey said pro-crony policies, in contrast to pro-business ones, erode wealth in the economy as cronyism fosters inefficiencies by ‘inhibiting the process of creative destruction’.These policies may promote narrow business interests and hurt social welfare.
It also reiterated the common belief that business houses which are close to political parties, also known as connected firms, get undue advantages. Crony businesses, according to the Survey, may lobby the government to limit competition in their industry, restrict imports of competing goods or reduce regulatory oversight.
Many social activists have accused large business houses/lobbyist of meddling in policies. While in most of cases cronies are said to have benefitted from their connections, there are exceptions when poor business model of a crony has became the reason of his/her downfall.
“These initiatives enhance the lobbying group’s income but undermine markets and reduce aggregate welfare. Thus, pro-crony policy can inadvertently end up being hurtful to businesses in general,” the survey noted.
The Survey also came down heavily on the allegedly mega scams like 2G spectrum allocation and coal block allocation scams that took place during the previous UPA-2 dispensation.