Read the passage given below and then answer the questions given below the passage. Former Reserve Bank of India (RBI) governor Raghuram Rajan said that consumers are benefiting in a big way from the business of scale with several services in the new technology age coming for free or very cheap, bu

Read the passage given below and then answer the questions given below the passage.

Former Reserve Bank of India (RBI) governor Raghuram Rajan said that consumers are benefiting in a big way from the business of scale with several services in the new technology age coming for free or very cheap, but it needs to be seen whether this can continue going ahead. Speaking in Davos at a session of the World Economic Forum (WEF) annual meeting, Mr. Rajan said we benefit tremendously from business of scale, there are benefits of efficiency at large corporations and consumers are gaining in a big way from low prices. For example, Google provides a big amount of free services, said Mr. Rajan, who teaches at the Chicago University and is regarded as a global voice on economy.

Mr. Rajan said that we all know nothing is free, so it needs to be known who is paying for it when consumers get it for free. He also wondered whether the business of scale is creating “super star firms” and who has the real power — is it large corporations or the governments? “Obviously they are making money somewhere and we need to know whether the two revenue sides of consumers and advertisers are comparable when it comes to data and technology platforms,” he added. Mr. Rajan said we need to think whether competition would continue in the future.

“The concern is not so much about today, but about tomorrow. We need to think whether these benefits from scale would continue for the consumers,” he said and added that “more than being about too big to manage, it is about too big to control. Our corporations are becoming too big to control for our political systems”. The panelists at the session also discussed big ticket mergers, digital platforms and market uncertainty that are transforming industries across the world. They also discussed how businesses are responding to this new strategic context.

Bank of America chief Brian T. Moynihan, Google senior vice-president Ruth Porat and Blackstone group CEO Stephen Schwarzman were among the participants. Mr. Moynihan said the banking industry in U.S. is still very unconsolidated, though there are big firms like Bank of America. He also defended strong regulatory framework for the banking industry, saying one cannot take money from people without having a strong set of regulations. Asked whether data is the new oil, Mr. Porat said data is much better as it’s not limited and data keeps getting generated by all of us.

Mr. Rajan said the U.S. has always been very uncomfortable with any entity being very big, starting with banks in 1930s. He said Facebook and Google are being talked about a lot today, but the U.S. has a history of proceeding against firms that became very big and they were broken down. However, things are changing now because of China coming into the picture.

Why are ‘super star’ firms a cause of concern for the economy?

1). They may become too big to control by political systems
2). They threaten the market competition
3). They pose efficiency concerns regarding the economy
4). 1 and 2

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