Government to establish Institutional Foundation for Markets

Ques 23. The state is essential for putting in place the appropriate institutional foundations for markets? Comment

Ans. We transformed from the era of NPA to NPM after 1988 as a result of the outcome of 2nd Minnowbrook. This time is the same time when our Indian economy opened up to the concept of LPG (Liberalisation Privatization Globalization) and LPG was happening all over the World as no country now has enough resources on its own to fulfill all its need. The theory of Public Choice and neo Taylorism has also displayed pro market orientation. But introducing market based approach poses 2 significant challenges.

Providing proper institutional platform for private investors so that they are encouraged to invest.

Ensuring adequate safeguards against possible misuse of public trust as happened with Lehman Brother USA in 2008.

Infrastructure is one sector in which adequate amount of capital has to be invested by the state because if roads, logistics, business lands, airports, harbours etc are missing then how can business occur.

The essentialness of the state can be manifested in below Indian context examples –

Schemes like SEZ, Focus Market Scheme, Market Access Initiative, Focus Product Scheme, DEPB, EPCG etc. are started by the Government to boost trade.

Concepts like FDI, FII, Department of Industrial Policy and Promotion etc. have been set up to facilitate enough foreign investment.

SEBI and Competition Commission of India have been set up to regulate trade and check alleged malpractices in the market.

So on this basis we can sum up that efficient institutional platform need to be provided to facilitate and regularize market in any country.