Friday, January 9, 2009

Should our economy really be free?

By: Subhadeep Bhattacharjee

Free market is one terms many people have lost love for. There was a time not too long ago when corporate leaders wanted the Government to have a hands off policy in all matters of business and economy. Today the same industry leaders look at North Block to rescue them out the financial crisis. The question that arises in this case is should we have a free economy without any regulators?

The ongoing financial crisis has hit the so called 'Free Economies' and hit them hard. Countries likes ours which are still under the clutches of red-tapism have been partially hit. It is not surprising that American banking system saw giants declare bankruptcy where as none of the Indian banks especially the nationalised once felt so much of tremors.

Information Technology is one sector which right since its beginning has seen very less of government interference. Being a by-product of the liberalisation phase it had very little bureaucratic intervention in its day to day affairs. Satyam Computer's forgery has shown that a totally free company with private auditors can be dangerous especially when its of the enormous size.

Do we need to forget the concept of a 'Free Economy' and get back to the days of 'License Raj'? The answer is a straight NO. Post liberalisation we have seen huge growth in almost all sectors. But again we need regulators who will monitor the functioning of our corporate houses. This will help us prevent incidents like Satyam. An interesting fact is all major financial scams have taken place in the post liberalisation era be it the Harshad Mehta, Ketan Parekh, Abdul Karim Telgi or the present one

A full capitalistic market can be dangerous for a country like ours where a third of our population lives below the poverty line and the middle class has no social security net over it. A remarkable achievement of the private sectors has been that it has created enormous amount of jobs which have gone to deserving candidates without paying any bribes. But again this sector cannot be left free to repeat a Satyam episode.

The regulators need not be bureaucrats but can be a force made out if private public partnership so that both sides are equally represented in the forum. We are a young economy which is showing tremendous growth potential. So we need to make sure that we do not repeat a Satyam like thing in the near future. Regulators and regulations are a must.


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