Sunday, October 8, 2006

Government Inefficiency

Lately, I have read a lot of articles (mostly newsletter) on government interference and its effect (usually bad). And I agree with it, though I do really would not go to the extreme of no goverment at all.

As an Indian I have witnessed the resources wasted by a government organization. The best way to go forward is to get the government out of as many sectors as possible. This will not only utilize the resource in best possible way but also reduce corruption.

Nowhere is the improvement in service & reduction in prices more evident than in the Indian telecom sector. Just few years back it was a pain to get a telephone connection. The sector was then opened to private players. Everything that has happened since then is revolutionary. In October 2000, I got my 1st cell phone. The price of an incoming call was 4 Rs/min and it was same for outgoing call. And this was the prise was in Mumbai I am sure the prices elsewhere would have been higher. However, as more and more players entered the market the prics fell. Reliance entered and the prices dropped drastically. Today, any one who wants a phone can have one.

How did this happen? Well, as soon as the government opened the sector enterpreneurs saw and opportunity and grabbed it. No government regulation forced Reliance to charge 40 paise/min for a call on top of giving away cell phones for free. It was the competetive market place which decided Reliance's strategy.

As a result of privatizaton, the government arms (BSNL & MTNL) were left with no choice but to offer the same services. I am sure this will reduce corruption atleast in these departments. The people if they are not happy with BSNL / MTNL have an option. They do not have to wait indefnitely for a phone connection.

In every sector the government has privatized the services have become cheaper and better. Examples include Air Travel (contrast Air Deccan with Indian Airlines), Banking (contrast ICICI with SBI). Even though the efficiency of private sector will not be evident on day 1 of reforms they do become evident few years later.

No comments:

Post a Comment