Abstract:
Institutional regulations by way of licensing and capacity
restrictions have often been considered as barriers to competition in
Indian industry. As most of these regulations have given way for market
signals an increase in the number of entrants and alterations in the
conditions of entry, mainly the barriers to entry are expected. In this
paper I attempt to analyse the extent of barriers to entry in Indian
manufacturing by empirically quantifying the height of these barriers.
Econometric estimation of the height of the barriers for 1991 and 1996
shows that the height of barriers increased in 1996 at the aggregate
level. An examination at the disaggregate level reveals that in almost
all the industries examined from a sample of firms drawn from the CMIE
the height of the barriers have increased in 1996 compared to 1991. The
dilution and dismantling of commands and controls intended to ease
entry have thus paved the way for the erection and strengthening of
market barriers which have grown over time
