The Economic Survey 2019-20 tabled by Finance Minister Nirmala Sitharaman in the Parliament on Friday suggested rationalisation of government intervention to boost economic freedom and wealth creation.
"While there is a case for government intervention when markets do not function properly, excessive intervention especially when the market can do the job of enhancing citizens welfare perfectly well, stifles economic freedom and creates 'deadweight loss' which is the loss created by the wasted chance of creating a consumer and producer surplus and reduces wealth creation by not allowing efficient allocation of entrepreneurial resources and energy to productive activities thereby promoting economic dynamism," the Survey said.
The Survey described the Essential Commodities Act (ECA) as "anachronistic and irrelevant" in the modern day India, as the Act was passed in 1955, when there were concerns over famines and shortages. The Survey suggests that "the Act must be jettisoned in order to grant more economic freedom to the market and to facilitate the process of wealth creation in the economy."
Further, the Survey expresses concerns over the regulation of drug prices through the National Pharmaceutical Pricing Authority (NPPA) and Drug Price Control Order (DPCO) as "it often leads to an increase in the prices of the regulated drug vis-a-vis that of a similar unregulated drug which is counter-productive and leads to a sub-optimal outcome".
It further advised the "Ministry of Health and Family Welfare and its related arms to imbibe the evidence to evolve non-distortionary mechsms that utilises Government's bargaining power in a market-oriented transparent manner."
It also suggested the government to make its foodgrains policy more dynamic and allow switching from physical handling and distribution of foodgrains to cash transfers or food coupons.
The Survey further says "an analysis of the debt waivers given by States or Centre shows that full waiver beneficiaries consume less, save less, invest less and are less productive after the waiver when compared to the partial beneficiaries. Debt waivers disrupt the credit culture and end up reducing the formal credit flow to the very same farmers, thereby defeating the very purpose of the debt waiver provided to farmers."
"The government must systematically examine areas where it needlessly intervenes and undermines markets. Eliminating such instances will enable competitive markets and thereby spur investments and economic growth," the Survey says.
( With inputs from ANI )