Reforming distorted markets will enhance India competitiveness

Source– The post is based on the article “Reforming distorted markets will enhance India competitiveness” published in the mint on 6th December 2022.

Syllabus: GS3- Indian economy and growth

Relevance– Economic policy for better growth and related issues

News– The article explains the competitiveness related issues of Indian economy

How has the competitiveness of the Indian economy made a substantial improvement in recent years?

There have been notable developments in sectors like access to education, infrastructure development and quality of business environment.

According to World Bank data, the percentage of population with access to electricity has increased from 83.9% in 2014 to 99% in 2020.

Since the beginning of PM Gram Sadak Yojana, nearly 700000 kms road length has been completed.

From 2014 to 2020, the number of universities has increased from 723 to 1043.

In the last 5 years , the student enrollment in higher education witnessed an increase of 11.4%.

The food production has registered a rise from around 252 million tonnes in 2014-15 to 316 million tonnes in 2021-22.

What are some of the competitiveness challenges faced by the Indian economy?

Market structures– The key competitiveness challenge lies in the build of our market structures. India has focussed on improving inputs. The market structures that translate these inputs into actual outcomes experience distortions at various levels. It occurs when interventions in demand and supply dynamics lead to misallocation of resources.

A World Bank report on the power sector suggests that India’s efficiency gap is about 4% of GDP a year. It points to electricity subsidies, inefficient power generation, transmission and distribution as some of the factors contributing to power shortages.

Similarly, there is huge distortion in the education sector. Inputs in terms of infrastructure and enrollment have seen positive trends. But this has not translated into better learning outcomes.

Business environment– It is another area where market distortions exist. Individual rules have been improved. But, underlying structures and capacity of the public sector behind regulatory burden were weak.

What are some steps taken by the government to improve the competitiveness of the economy?

The PM Shri scheme aims to develop 14500 select schools by providing high-quality education keeping inclusivity and equitable outcomes central.

Udyam portal for MSME and National Logistics policy framework are some of initiatives to  make market structures more efficient.