Search

The announcement of New Industrial Policy in July 1991 marked a paradigm shift in the overall macroeconomic policies followed in India from greater control and regulations to the free rein of market forces. Subsequently, there has been a paradigm shift in the competition regulation in India, with the establishment of the Competition Commission of India. The underlying motive behind the regulatory changes has been to increase competition in all spheres of economic activities. Given this background, the present study intends to assess whether the changes in policy regimes could bring out the desired output in terms of heightened competition in various spheres of the manufacturing sector, specifically across various subsectors in the manufacturing sector. These are important not only from a consumer point of view but also to identify the areas of concern for vigilant policy implementation. Using multiple indicators of concentration, we find that despite the increase in competition across various subsectors, concentration levels remain high for many subsectors. We observed high levels of concentration in seven of the twenty-nine subsectors studied and in another three high-moderate concentration levels noticed. [ABSTRACT FROM AUTHOR]

This paper proposes a proximity-concentration tradeoff in product space as a determinant of horizontal foreign direct investment (FDI). Firms that enter a foreign market by exporting are able to capture consumer surplus by introducing a differentiated product with characteristics that the incumbent cannot match. In relatively globalized product space, in contrast, consumers perceive an entrant's difference to existing products as less pronounced so a consumer's virtual distance costs in product space are lower and a merger with an incumbent (horizontal FDI) offers pricing power that allows the entrant to extract consumer rent. Lower physical trade costs of shipping make Bertrand price competition fiercer in differentiated product space and can provide an additional incentive for a merger. A basic product space model with a linear Hotelling setup can therefore explain why FDI has become more frequent in recent periods in the presence of falling trade costs. Cross-border merger and acquisitions data support the model's prediction that horizontal FDI grows relatively faster than exports in differentiated goods industries, compared to homogeneous goods industries. © 2014 City University of Hong Kong and National Taiwan University.