The Telegraph
Since 1st March, 1999
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The current tariff war in the mobile phone business is the clearest indication that economic reforms should be hastened

Advocates of a planned economy may cry themselves hoarse proclaiming the adverse effects of laissez faire. But facts show that liberalization benefits the consumer. One has only to look at what is happening to prices in the domain of cell phones. Prices have been slashed and at the root of it is competition. The process began with Reliance Infocom announcing its tariffs in the field of limited mobility. This provided some indication of what was to come in other related fields. To counter the aggressive pricing of Reliance, the chief executives of seven cell companies met to announce their own plans. The result of this meeting was a massive cut in tariffs of mobile to mobile STD calls. It is widely felt that this was only the first salvo and more cuts are forthcoming. It does not need any special qualities to fathom how this has been possible. The mobile phone market is no longer the monopoly of one service provider. There are a number of players, all of whom want to provide the best possible service at the best possible price to their subscribers. This can only be a bonanza for consumers. They now have a choice of service and of price. It is probable that Reliance too will match the prices that the other mobile phone operators have announced or will be announcing very soon. This will produce more competition in terms of price and service till the market dictates an equilibrium.

There can be no denying the fact that this benefit has accrued to the consumers only after the dismantling of the socialist edifice and the consequent opening up of the economy to private enterprise. This injected a modicum of dynamism into the economy by releasing the energies of entrepreneurs. As the shadow of the permit and licence raj receded, the character of the Indian economy began to change. The transformation has not been smooth and it is by no means complete, but already the benefits are obvious. Liberalization has put the consumer at the heart of the economy — which is as it should be. The end of the state’s monopoly in telecommunications has had the immediate effect of reducing price and increasing efficiency. For a long time, exorbitant tariffs were imposed on long distance calls to subsidize local calls. This was completely out of tune with global norms. This has now been set right, albeit not completely. There was no logic to this subsidy since the latter was provided not to the poor who deserve to be subsidized but to the middle-class domestic users of the telephone.

Only one possible lesson can be drawn from the tariff war being witnessed in the mobile phone business. The moral is that economic reforms should be hastened and the economy should be further opened up. This will benefit the economy as well as the individual consumer and entrepreneur. New technology and new global norms of trade have utterly revolutionized the nature of business and entrepreneurship. Indian businessmen can no longer remain cocooned, nor do they want to remain shackled by either state regulations and monopoly or by protectionism. The market has been opened and more opening up will only bring greater joy to the consumer.

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