Govt as the disruptor in a market economy
The Union Budget is around the corner. And while it brings a sense of anticipation, pro-market enthusiasts deride this excitement, saying the Budget should ideally be a routine event to announce government accounts. They don’t want the government to play a very big role in the economy, and want it to stick to a few basic policy announcements. This ‘minimalistic’ approach, also known as neo-liberalism, often stems from the unshakeable belief in markets and competition. Yet, it has been proven time and again that government interventions reshape markets, make them more inclusive, and empower citizens to participate in a ‘competitive’ market economy.
Aadhaar and UPI are two prime examples in recent years that have proven that government intervention can benefit both citizens (or consumers) and businesses. Aadhaar, which the government undertook about 13 years ago, provided the platform for India’s now successful digital infrastructure. Indian corporates are using Aadhaar to acquire customers, develop business models, and increase the reach of their businesses to new geographies. Unified Payments Interface, another government intervention, changed the course of payments and money transfers in India. UPI was preceded by another revolutionary idea of the government, to set up NPCI, the umbrella body which created a robust, low-cost payment and settlement infrastructure in the country. Equipped with Aadhaar and NPCI’s RuPay payment system, financial inclusion increased in leaps and bounds, and so has the formalisation of the economy. The government is now building an open-source platform for e-commerce in India. This allows small sellers, restaurant owners, etc., to access a larger customer base without having to dole out 30–40% in a commission that they share with existing platforms.
While some may question the need for the government to create such platforms when the private sector is already doing so, as long as the government remains just the facilitator and enabler, one cannot find fault in this approach. The government cannot sit on the fence when it comes to the larger interest of the people. In a ‘perfect’ market economy, people are treated as consumers whose fate should be decided by competition in the market. The government can, however, play the role of disruptor once in a while, to shake the status quo in the market. We have already seen the benefits of it.