Chapter 3- Pro-Business versus Pro-Crony- Economic Survey 2020 Analysis


F1:          The diversity of sectors in the sensex steadily increased over time following market reforms. It shoes less concentration of wealth in few firms and diversification of firms post liberalisation.


F2:    Benefit of liberalisation can be gauged from the democratisation of the firms. Now the ratio of size of Biggest/ smallest firm is just 12. In 1991 it was just 100.


C1:    Creative destruction create wealth in an economy. It is a process of Industrial mutation that incessantly( continuously) revolutionises the economic structure from within, continuously destroying the old one and creating a new one.


C2:    Difference between Pro business vs Pro Crony


Pro Business Pro crony
Firms compete on a level playing field Some incumbent firms may receive preferential treatment
Efficient resource allocation in an economy Resource allocation may not be an efficient one
Maximisation of citizen welfare Citizen welfare may not be maximised.



C3:    Dutch Disease: Firms that got free resources diverted efforts towards the tunnelling of the windfall gain instead of towards productive business activity.



C4:    Block diagram: Dutch disease and wilful defaulter


F3:    Wilful defaulter have an obligation of about 1.4 lakh crore. Most of them are from manufacturing sector.


F4:    Had the money siphoned away by wilful defaulter stayed in the economy, the amount would be equivalent to :

  • 2 X ( Health sector expenditure, Rural development expenditure)
  • 3 X ( MGNREGA expenditure)


C5:    Characteristics of wilful defaulter(WD):

  • WD tends to be more opaque.
  • 60% of the non defaulter and distress defaulter practice non party disclosure.
  • WD make large loan to related parties whereas such practice is not common with distress defaulter. Later are net receiver of loans.


C6:    WD leads to:

  • Transmission of wealth from poor to rich.
  • It increased cost of borrowing for others.
  • Risk aversion attitude increases for banks.
  • Erosion of wealth creation capacity
  • Exit of genuine borrowers from the market.



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