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India should shake up large conglomerates and unleash competition by allowing overseas companies to invest in domestic manufacturing.
The protection given to the Indian corporates by way of high tariff has stifled innovation in manufacturing and incompetency survive hurting consumers interest.
Viral Acharya, CV Starr Professor of Economics at New York University Stern School of Business and former Deputy Governor, RBI, said the trade barrier in India is one of the highest and ranks fourth behind Egypt, Sudan and Venezuela which, of course, is not the place to be for a fast-growing economy.
Indian corporates are on a cozy position where they do not have to innovate or create a global brand as they are comfortable making good profit by tapping into the domestic markets under a well-protected business environment, he said at an event organised by Elara Capital on Monday.
The protectionist environment is clearly visible in electric vehicle space where the country wants the domestic companies to establish themselves first by getting the right technology before letting in competition, he said and added that tariff on some of the agriculture produce should be bought down to pass on the benefit to consumers.
The industrial concentration with top 5 conglomerates capturing bulk of the market and they dictate terms by buyout the competition. The competition in the industrial space has become less intense due to concentration of industries by large corporates, he said.
The higher margins of these domestic tigers are higher, and they become the darlings of stock market, he added.
On telecom
Answer a question of government presence in the telecom space, Acharya said it would have been better decision to let telecom company (Idea Vodafone) fail than saving it for the sake of competition.
The failure of the telecom itself was due to the predatory pricing of the dominant players and the bail out the corporate has stopped a new company emerging.
On banks
On public sector banks, he said some of these banks are taking money from the investors as deposits and putting them in mutual funds instead of lending it for creating fresh assets.
These banks do not need a government ownership to divert money into mutual funds, he added.
The consumption in the rural regions are still very low and needs to ramped up to take growth beyond 10 per cent as there is a limit to which the urban India can support growth, said Acharya.
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