Pro-market versus pro-business policy
Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT
Meaning
This distinction comes from the economists Rajan and Zingales. A pro-market policy creates a level playing field, meaning the same rules and fair competition for every firm. A pro-business policy gives favours to particular firms that are already established, called incumbents. The first raises efficiency, while the second can slide into cronyism.
Example
Allocating coal blocks or spectrum through open auctions is pro-market, because any firm can bid on equal terms. Handing them out at an official's discretion to favoured firms is pro-business. The Economic Survey 2019-20 described this choice as "pro-business vs pro-crony".
Don't confuse with
- Laissez-faire: this means the state keeps out of the economy entirely. A pro-market policy may need an active state that enforces competition, for example through the Competition Act 2002.
Related concepts
- Industrial licensing
- Licence Raj
- Licensing for regional equality
- Freight equalisation policy
- Crony capitalism