Govt. control in market volatility

There was a time when the government controlled petroleum prices, and those prices were updated at the will of the Govt. to get political favouritism. And when, suddenly, big price changes was unavoidable it was like a shock in the entire economy.

The Govt. learned from these experiences that it is much better to dribble out small price changes on a regular basis.

Same is with the exchange rate of dollar-rupee. It is possible to hold the exchange rate fixed for some time. But a gap opens up between the free-market price and the government-controlled price. This gap induces economic distortions and, then we get large moves of the exchange rate, which are even more disruptive than the flow of daily fluctuations of a free-market exchange rate.

Every firm has to face various changes in prices of raw material and finished goods in it’s day to day business. To be in business is to look at this landscape and figure out how to make money in this ever changing world of economy.

This is a hard fact, that most of the firms want an easy life. They want the government to give them a fixed environment where prices of steel, cement, petrol, dollar-rupee, etc are locked in.

It is understood by us that with such government support, the firms will learn to produce and export by making themselves strong and sustainable. But, companies get complacence due to long changeless situation and could not build up the required organizational strength.

From the viewpoint of Indian economic growth, the economic development lies in the emergence of capable and irresistible firms.

Exporting is not the end: Capable firms with high productivity are the end. Exporting prowess is the thermometer where we get to read the capabilities of the firms. When firms fight fair and square to achieve exports, they achieve productivity.

High – productivity firms are those that build high and strong organizational capability that copes with price fluctuations. It takes many years of deliberate effort to get to high institutional capability.

Unorganized and weak firms that ought to have been destroyed by price fluctuations, linger on in the landscape, occupying resources that should be freed up to support high productivity.

This is the best time to capitalize on the support, that, the Indian Govt. is giving to the Plywood and Panel industry, by restricting imports through QCO.

It is really also a very difficult task, to assess Global political and economic conditions, matching it with the domestic circumstances.

Hence, making good use of the present favourable time, we should set high goals for ourselves and work whole-heartedly, using all our resources to achieve those goals is expected by all.

Suresh Bahety 

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