102 SOCIAL SCIfiNTlSt prepared by the Industry Department of the World Bank titled "India ; Industrial Regulatory Policy Study".1 The report focuses on four aspects of regulatory policy in India : first, the system of industrial licensing, which sought to ensure that the rather limited resources available in the years immediately following Independence were allocated in directions in keeping with the overall growth and distributive objectives of the Indian State. Second, the Foreign Exchange Regulation Act (FERA), which was aimed at reducing the influence and domain of foreign capital within the Indian industrial sector, by ensuring that the former's entry into Indian industry was not only restricted but could occur only by accepting a significant Indian role in the operation concerned. Third, the measures aimed at ensuring the growth of the small scale sector and at controlling the growth of big business (MRTP), so as to preempt the concentration of assets and incomes in the hands of a few business houses. And finally, the policies aimed at preventing closure due to "sickness", which could result in a loss of jobs and a reduction in total employment. While accepting that some of these industrial policy objectives have been attained and that as a result of these policies India now has a relatively large and diversified industrial base, with chemicals, basic metals and machinery accounting for close to 70 per cent of manufacturing output, the Bank report turns its attention to what in its view are the failures that resulted from the above policies. These are essentially threefold : first, the deterioration in the rate of growth of industrial value added in the period since the mid-1960s ; second, the relatively slow pace of technological progress, reflected in the delay in the introduction of new techniques in the Indian market and the persistence in use of obsolete techniques ; and third, the consequent slow growth in "total factor productivity", which has been ^close to zero" over the last two decades, resulting in a decline in India's competitiveness in the world capitalist market. All of these features of industry and in particular the slow rate of technical change are, according to the Bank's economists, "partly a reflection of the fact that the three basic forms of competition—internal competition, import competition and export rivalry—have to a large degree been absent in most industrial markets." That is, the study claims to underscore the importance of competitive forces (replace with free market) as prime movers of the production frontier in expanding the productive and innovative capacity of the economy. Unfortunately, according to the Bank, policies of the kind delineated earlier, have not only had a pervasive and, in comparison with other industrializing countries, unique role in shaping the internal competitive environment in India, but by raising entry, growth and exist barriers, have also reduced the actual and potential degree of internal competition. How have these policies ensured a reduction in competition ?