Market doesn’t work the way the theory wants it to behave. It’s not the fault of the theory though. Because the riders involved in the perfect competition are never experienced in the real life. It’s a utopia, a perfect situation which life never throws up. As a result, there is always a lack of balance among the stakeholders in the market place. To correct the anomalies and protect the rights of every stakeholder in the market play we need laws related to the market. And consumer protection laws fall in that category.
By saying this we probably have jumped the gun. Therefore, let us retrace our steps to the beginning. A proper market assumes a fair play. Consumers and sellers/producers are the two sides of the market coin. Consumers constitute the demand side of the game and the sellers/producers constitute the supply side of it. In a perfectly competitive market a consumer always has the right to choose the best option among many. Through the process of competition price and quality tend to converge and the ones offering product at a higher price-point with inferior quality will be thrown out of the market.
This is a situation that is hardly obtained in real life. In most of the cases, producers are few in number and consumers are many. Not only that, financially producers operate from the position of strength that makes the consumers vulnerable to the ‘diktat’ of the producers as it necessarily becomes difficult for a consumer to seek redressal if the law of the land fails to protect.
In the absence of a legal system that disapproves of deviations between promise and delivery, the tendency to dupe the customers tend to harden. For example, between 2014 and 2016 there was 70 per cent leap in consumer complaints once a helpline to protect the consumers was set up. This itself points to the tendency of abusing the rights of the consumers to fair deal for reasons of reaping an easy profit in excess of what ought to be considered fair.
On the other hand, what in Economics is known as monopsonistic or oligopolistic market situation in which there are many sellers/producers and sole or a few buyers market tends to be abused from the demand side. To reap a price advantage such buyers tend to take advantage of the market situation by squeezing the price down to a level that tends to suffocate the supplier.
In a situation of this nature, a supplier is forced to accept a less than fair profit just to survive. Unfortunately, however, while from the point of view of activism, propagation of consumer rights yields more political benefits due to the sheers number of beneficiaries involved in the act the same logic for a long time didn’t apply to the suppliers in a stringent way.
It has also been tended to be assumed that business-persons will have enough financial muscle to fight their rights out. It’s only recently, however, once the MSMEs grew enough in numbers that the law makers have started to focus on the rights of the producers in terms of getting their payments in time among others.




Soon after taking over as the Governor of the Reserve Bank of India, Mr Shaktikanta Das struck a note of caution against waivers of agricultural loans. In early January, 2019 Mr Das said that states should think hard before declaring loan waivers as the entire public finance system gets hugely disrupted due such decisions. He said that three states – MP, Rajasthan and Chhattisgarh – alone had Rs 1.47 lakh crore loan exposure in agriculture.
But the issue doesn’t end here. Such political decisions also have an implications in terms of raising risks for the financial exposures in the sector as it also reinforces aversion to loan repayment. This in turn leads to higher perceived risk in giving out loans for the financial institutions as people tend to delay repayment in the hope of getting a waiver from the government.
The opposition to such waivers rests on a) greater propensity towards fiscal profligacy and b) disrupted credit culture. Just before Mr Das sounded his alarm, in December, 2018, the bankers had voiced their worry about how tendency to waive agricultural credit would enhance bad practices in the loan market in so far as loan repayment environment was concerned. However, there is a third crucial factor – the small farmers who are susceptible to the market fluctuations and the vagaries of nature.
Bankers, we must realise, are compensated for the part of the loan that is waived from the government coffers. So ultimately the onus shifts on to the shoulders of the tax payers even if the government decides to take the debt route instead of the tax route. Because the government will have to meet the debt repayment burden from the revenue earnings which are nothing but taxes realised from the citizens.
But the worry goes deeper as the culture plays with the expectations about the need to repay the loan. India unfortunately has built up a tradition of loan waivers. If we go back to the days of the loan melas where banks were just treated like taps for disbursement of money with a very high probability of loans getting waived, specially in the agri sector, it is easy to understand why people expect that sitting tight on repayment will not attract any penalty and the government would eventually declare a waiver.
The narrative that tends to unfurl from here is that the loan channels are also not spared in terms of cost. A loan given out whose repayment inflow is disrupted due to defaults plays havoc with the balance sheet of the channels, which ultimately not only bleeds the credit agencies it also costs the economy in terms of raised risk profile that necessarily has an hardening impact on the interest rate structure of the economy. Ultimately, the final sufferers become the farmers as within the structure an aversion builds up in creating an extra effort to reach out to them with loans that they need.
This argument however does not take away the merit of the third factor that triggers the politically motivated waiver decisions. A waiver of this nature is understood in the political decision making process as the sure fire step of garnering votes no matter what the cost is to the economy. An alternate way would of course be to look into the ways of providing them with the required relief while avoiding the waiver route – be that through an affordable route or some other way.
Net net, the point that flows from the above logic is that though loan waiver leads to benefits to a limited set of stake holders, in the medium to long term this strategy actually harms the intended beneficiaries by hardening the resistance of loan channels for going for greater and longer exposures in the agricultural sector.


Development projects do require innovations but the understanding of innovation is actually a key to the solutions being sought. If the belief that innovations are the only way an issue will be resolved becomes the mission statement of the project, the project itself will take the back seat and innovation by itself will become the project. This will also lead to reinvention of the wheel to the benefit of none.

Let us look into the issues in depth. In the cases of development problems as in the cases of business entities innovation may not always be material. In some cases it may involve innovating around the implementation of the project which is an administrative issue. Why do we need an innovative implementation process? In most of the cases the broad policy issues, say with regard to the protection of the environment involving river, forest among others, are written down and approved at the top administrative level. But their implementation requires active local participation with beliefs and credos being highly localized and peculiar to the micro society involved.

The challenge therefore is make the local people understand and accept the issues and solutions involved. That requires creation of awareness. To do that an innovative approach might involve using the local beliefs to the advantage of the project or breaking certain beliefs that may be hurtful to the protection of environment. It may involve taking the local influencers into confidence and get them involved and it is where an innovative approach may yield effective dividends. This is an innovation in the area of garnering participation.

Then there may be technological innovation that may be required to solve a particularly nagging problem of addressing cash transfers for micro-finance collections. Because of the rural reach issues it may not be feasible to provide as adequate armored protection as cash transfers of banks. However use available technologies and it may require innovating around digital fund transfers.

There are of course other innovations like policy rejigging which have become quite a buzz or innovative delivery mechanisms like micro-finance.

However now comes the caution. In the world of development activities, innovation has become a buzzword. But there are risks involved in overemphasizing innovation that actually is a derived ‘love’ from the world of business. For example in issues of innovation in businesses involving rural crafts if one gets into innovation it may turn out to be a total waste of resources as the technology hasn’t changed much in the last hundred years and introduction of innovative existing technology may bring down the retail price of the product.

There is also the issue of risk. A radical change in the use of resources and putting them to use in development may jack up user cost and turn it to be an unwanted burden for the poor without providing any measurable return to the users translating into social profit. Instead it may add to the misery of the target group.

The MFI route as the delivery innovation has proven to be a very effective channel of intervention. The local problems and their solutions are best served by allowing the locals to participate in the solution seeking process while retaining the MFIs as the core funding channels by fostering the process through a business mode. There is a need therefore to focus on the greater utilisation of the MFIs in the process.

Net net while there is no denying the fact that innovation is required in the process of development, there is also a danger involved in the over-reliance on innovation that runs the risk of turning the targets into secondary objective with the innovation that ought to be a tool turning into primary objective.

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