Measures to Control Monopoly in India - Growth, Development and Structural Change, Indian Economy | Indian Economy - B Com PDF Download

Understanding Monopoly : Government Measures to Control Monopoly in India

In the sixties, the problem of growth of monopoly power drew particular attention. The Government appointed the Monopolies Inquiry Commission in May, 1964, under the chairmanship of Justice K. C. Dasgupta. Its task was to enquire into the existence and effect of concentration of economic power in the organized private sector. It excluded the public sector and agriculture from the purview of its study. It investigated cases of ‘product -wise concentration’ and inter-industry concentration. Planning in India is fundamentally opposed to concentration of economic power.

But curiously with the progress of planning in India, it was realised, that there was growing concentration of wealth and econo­mic power in fewer hands. The benefits of economic growth did not percolate to the poor. In the agricultural sector it was cornered by the big landlords. In the industrial sector also it were the big industrialists who benefited. We thus failed to achieve economic growth with justice, so enthusiastically enshrined in the Directive Principles of the Indian Constitution.

Economic power gets concentrated through the monopolistic and restrictive trade practices.

“Monopolistic practice includes every practice whether it is by action or understanding or agreement, formal or informal, to which persons enjoying monopoly power resort in exercise of the same to reap the benefits of that power and every action, understanding or agreement tending to or calculated to preserve, increase or consolidate such power.

Restrictive practice refers to “practices other than those pursued by monopolists which abstract the free play of competitive forces, impede the free flow of capital or resources into the stream of production or of the finished goods in the stream of distribution at any point before they reach the hands of the ultimate consumers.”

According to the commission,
(a) controls and licenses have played a major part in the creation and growth of monopolies,
(b) Big business has advantages over the smaller businesses in securing financial accommodation. It enjoys many economies of scale- “Big business by its very bigness sometimes succeeds in keeping out competition.”
(c) Intercorporate investment of funds and interlocking of directors was-another factor,
(d) Foreign collaboration also helped big business rather than small business.

Evils of Monopoly in India :

The growth of monopoly power has the following evils :

(a) It was disadvantageous to the weaker sections.

(b) As development proceeds, the initial monopolies have more of an absorbing than spread effects.

(c) Economic disparity which arises due to undue concentration of economic power “affects economic growth itself in the long; run and inhibits it, for such growth is not sufficiently wide­spread to be self-generating’.

(d) Monopoly leads to the growth of inequalities.

(e) It has the power to corrupt.

(f) It can influence economic decisions of the government. Since big business controls the press, it can influence the public world opinion as well to its favour.

(g) Monopoly is also responsible for misdirection of resources.

The Monopoly Inquiry Commission, however, failed to comprehend the nature of the concentration problem in its proper perspective. While commenting on the economic consequence of concentration, it held that such concentration fostered economic growth. It led to increased capital formation. It was also responsible for the development of managerial skill. Big business has also succeeded in attracting foreign collaboration. “Thus monopolies have become the engines as well as consequences of growth.”

Government Measures to Control Monopoly in India :

The M.I.C. pointed out that there is a circular relationship between monopoly and development, each appearing as a cause and effect of the other. Thus a vicious circle is being formed. It is a circle without an opening. It is a growing circle. If left to itself it has a cumulative effect. The state therefore has taken a number of measures to control the growth and exercise of monopoly power in India

1. The Monopolies Restrictive Trade Practices (MRTP) Act :

On the basis of the recommendations of the Monopoly Inquiry Commission the MRTP Act was passed which came into force from June, 1970.

The provisions of the Act came to be divided in three groups, namely,

(a) provisions relating to concentration of economic power,
(b) those relating to monopolistic trade practices and
(c) those relating to restrictive trade practices.

The Act provided for the establishment of a permanent statutory Monopolies and Restrictive Trade Practices Commission, which started functioning since 1970.

The Act provides for strict surveillance of the large business houses. They most seek government’s permission for expansion, for merger, amalgamation or for starting a new undertakings.

The Act also requires all collective and bilateral agreements relating to restrictive trade practices to be registered with the Registrar of Restrictive Trade Agreements. Such restrictive practices include collusive tendering, collective price fixing, withholding or restricting of output, collective boycott, tie-up sale, price discrimination, exclusive dealing, predatory pricing, restrictions on manufacturing process, etc.

In foreign countries like France, Canada, West Germany, etc, public sector bodies come under the purview of restrictive trade prac­tices. But in India public sector bodies are outside the regulatory provisions.

The MRTP Amendment Bill 1983 seeks to protect consumer not only from restrictive trade practices but also from unfair or unethi­cal practices like misleading advertisements.

Other measures to curb the growth of monopoly power in India are the following :

1. Enactment of Foreign Exchange Regulation Act (FERA) 1973.

2. The expansion of the public sector particularly in infrastructure and in basic and heavy industries.

3. Vigorous promotion of village and small industries.

4. Regulation of flow of financial resources to the private sector from the public financial institutions.

6. Development of the co-operative sector.

7. Price regulation and regulation of distribution

Sometimes it is argued that the top 20 monopoly houses should be nationalized, if we desire a cure for the monopoly problem permanently.

Here we should remember that an important feature of planning in India is the acceptance of the concept of mixed economy. In a mixed economy the public and private sectors coexist and contribute to the fulfillment of the planned objectives.

The Industrial Policy allows the private sector to develop in relation with the targets and objectives of national plans and policies.

At present there are innumerable instruments with the Government to regulate and control the activities of the private sector, so as to prevent the growth of monopolistic tendencies. The Government therefore has rightly declared that it has no intention of nationalizing the top 20 monopoly houses. But then, the various instruments available with the Government for controlling monopoly should be sincerely and effectively utilised.