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Economy

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November 21, 2017

Government monitoring prices and asking businesses to justify pricing decisions goes against the free market principles. Discuss the above statement in the light of National Anti-profiteering Authority (NAA).  

Refer – The Hindu

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IAS Parliament 6 years

KEY POINTS

·         National Anti-profiteering Authority (NAA) was constituted to crack down firms that fail to pass on the benefits of the tax regime to consumers.

·         It is empowered to order businesses to reduce product prices or refund the undue benefits earned, back to customer.

·         In extreme cases, it can even impose a penalty on errant firms and cancel their registration with GST.

Issues with NAA

·         It disregards the laws of supply and demand.

·         It ignored the fact that, prices are determined by the free market forces rather than input costs that a business incurs to bring a product to the market.

·         There is no clarity on how the government will ascertain the difference between undue profit and fair play.

·         NAA might not heed to people’s interest for goods. It might lead to a pre-liberalization policy of state mandated production of goods.

Solution

·         Without ensuring competitive markets and financial inclusion, measures like creating NAA will not give fruitful results.

·         So, NAA will be effective only if, it focuses on select firms raising prices indiscriminately and leaving market forces undisturbed.

·         Hence, the authority’s should use their powers transparently and only where there is genuine consumer/public interest at stake.

·         Protecting consumer interest is important, but the prospect of the government monitoring prices and asking businesses to justify pricing decisions instead of letting market forces play out is discomforting.

Manav 6 years

Please review. 

IAS Parliament 6 years

Shorten the introduction. Otherwise a good attempt. Keep Writing

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