Concentration of Economic Power

Summary

Delivered as the Sixth A. D. Shroff Memorial Lecture in Poona in 1971 and published by the Forum of Free Enterprise in July 1972, D. R. Pendse’s booklet argues that India’s intensifying preoccupation with the ‘Concentration of Economic Power’ (CEP) has itself become a danger to economic growth. Writing as Deputy Economic Adviser to Tatas, Pendse traces the policy lineage from Prime Minister Jawaharlal Nehru’s 1959 decision to commission what became the Mahalanobis study, through the Monopolies Inquiry Commission (1965), the Hazari Committee (1967) and the Dutt Committee (1969), to the Monopolies and Restrictive Trade Practices (MRTP) Act, which came into force in June 1970. He contends that the Act — and especially its Chapter III, which vests sweeping discretionary powers in Government to approve or reject expansion proposals — already constitutes a more than adequate weapon against concentration; the trouble is the obsession that has grown around it.

The lecture’s central polemic targets the inherited framework of ‘Larger Industrial Houses’ (the list of twenty from the Dutt Committee’s July 1969 Report on Industrial Licensing Policy), which Pendse calls outdated (resting on data from 31 December 1966), logically unsound, and substantively wrong as a proxy for the CEP problem. He proposes that Government instead set up a fresh Concentration Evaluation Commission, charged with evaluating concentrated economic power against the common good and saying who else is to the common detriment. In the meantime, he argues, genuine growth-oriented policies are being sacrificed to anti-concentration posture. Telco’s truck-capacity expansion is held up by the Monopolies Commission while defence-grade trucks are short; mini-steel plants are blocked even though Bhilai’s 2.5 million tonnes and Tisco’s 2 million tonnes are nowhere near sufficient; banks are nationalised and then disabled from lending to managing agency systems by the same anti-concentration logic.

Pendse then turns to the small-scale sector, arguing that its products often compare unfavourably with those of organised industry on both price and quality — by as much as 15 per cent in tenders — so that consumer welfare, especially that of the poor, is sacrificed to a mythologised image of the small producer. He defends the diffusion of entrepreneurship as a laudable objective in itself but rejects the zero-sum framing that one sector must shrink for another to grow: ‘there is thus more than room for all.’ Citing the Ruling Party’s Garibi Hatao mandate and Professor Dandekar’s recent pioneering study, which found that at least 60 per cent of Indians fall below the minimum per-capita consumption norms used by the Planning Commission, he closes by calling for ‘sinking ideological differences’ and mustering the co-operation of all — poor or rich, small or large — to meet the country’s difficult economic emergency. That, in his view, is the road to good economics as well as to good politics.

Key points

• Argues that the obsession of policy-makers and the public with the ‘Concentration of Economic Power’ (CEP) has crowded out the more urgent task of accelerating economic growth.

• Traces the institutional history of the CEP debate from Nehru’s 1959 initiative through the Mahalanobis study, Monopolies Inquiry Commission (1965), Hazari Committee (1967), Dutt Committee (1969) and the MRTP Act of June 1970.

• Holds that the MRTP Act’s Chapter III, framed in pursuance of the Directive Principle of State Policy, already gives Government sweeping discretionary powers to police expansion, mergers, amalgamations and inter-connected undertakings.

• Rejects the Dutt Committee’s framework of ‘Larger Industrial Houses’ (the 20-House list, anchored in 31-12-1966 data) as outdated, internally inconsistent with the MRTP Act, and a poor proxy for the real CEP problem.

• Proposes setting up an independent Concentration Evaluation Commission to define the criteria of ‘common good’ and ‘common detriment’ and to take a fresh, time-bound look at concentration.

• Cites concrete cases — Telco’s truck expansion delayed by the Monopolies Commission despite defence shortages; the blocking of ‘mini-steel plants’ against Bhilai’s 2.5 mt and Tisco’s 2 mt; bank nationalisation later kept from lending against managing agencies — to show how anti-concentration policy throttles essential capacity.

• Challenges the assumption that the small-scale sector is automatically welfare-enhancing: its goods are often 15 per cent dearer than large-sector tenders and of lower quality, hurting the poor consumer who is the supposed beneficiary.

• Closes with a plea to drop ideological postures and treat private enterprise — large and small — as a partner in tackling poverty, defence shortages and growth, citing Prof. Dandekar’s poverty study and the Garibi Hatao mandate.