Regulator'S Role

One of the criticism of economic policies prior to 1991 is that it did not allow competition and firms were not allowed to grow into big companies. The licensing system discouraged competition. At the same time MRTP Act which covered both concentration of power and monopoly in trade encouraged new firms to get license to encourage competition. In fact many businessmen complained that they are small firms at the international level and they must be allowed to grow big. The regime witnessed restricted competition. This led to wastage of resources, as the firms could not reap benefits of large scale production. Public enterprises which had complete monopoly could not operate at the optimum level.

Liberalisation is expected to encourage competition and favour liberal access to mergers and acquisitions. But there is a contradiction. Competition demands that more firms operate in a field. Mergers would reduce the number of firms. This can be termed as competition among giants. But may encourage cartels. This requires defining the role of a regulatory body.