Market power and monetary policy

25 JUL,2021 | MEDC


 

Excess market power in the hands of any single entity is undesirable. Not only does it hamper overall business dynamism and growth, it also dampens RBI’s ability in using monetary policy effectively to influence economic activity. Larger profits make big firms less sensitive to changes in external financing conditions, such as those triggered by RBI’s policy decisions, as they can decide on investment and other operations without worrying much about their funding issues. This strengthens the case for reforms to increase competition. Enhancements to competition law and policy frameworks (including specific measures to cope with the fast changing digital economy) need serious consideration. Today’s policymakers need all available tools to engineer a dynamic and inclusive economic recovery. In this regard, the curbing of excess corporate market power should be examined.

*Photo Credit: Google

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