Guru: learning economics from the movie

The film 'Guru' is based on life and times of Dhirubhai Ambani. The highlight of the movie is the epic battle between Dhirubhai and Ramnath Goenka, head of the Indian Express. The Indian Express unearthed violations of certain economic laws by Reliance Industries. These appeared in a series of articles in the Indian Express which were authored by S. Gurumurthy (played by Madhavan in the film) and research carried out by Arun Shourie, who were reporters in the IE .
Arun Shourie in an interview given to Knowledge@Wharton states his opinion about the matter and I quote -

"My colleague S. Gurumurthy had written a series of articles on Reliance Industries. Their main point was that its founder, Dhirubhai Ambani, had circumvented the conditions under which licenses were given. I later said -- and I was criticized a lot for this remark, including by my friend Gurumurthy -- that we had put Mr. Ambani to great difficulties. But in retrospect, should the violation of those regulations have been condemned? After all, the licensing raj was bad; my own doctoral work had shown that. Now we were criticizing somebody for violating rules that should not have been there in the first place. If you give me a capacity of 100 yards and I produce 120, is it a good or a bad thing? But it was a violation of the law as it stood then. I took the view that such violations, in the end, help prepare the ground for the change of the law itself.

We had extortionate tax rates in the 1950s. More than 100% of our income went into wealth tax, expenditure tax, income tax, and so on. That led to honest people becoming dishonest. In the end, that huge blackmarket became one of the arguments for lowering tax rates."

Austrian economist Freidrich von Hayek, the proponent of capitalism, had said: "…by exceeding the limits in which those restrictions sought to impound them, they help create the case for scrapping those regulations".

There are interesting scenes in the movie which tells us about the kind of economic policies prevalent in India which has resulted in India being a 'Third World' poor country. One of them is if someone wants to import anything (raw material or finished goods) then he has to show that he has also exported something. This is to save 'valuable foreign exchange' ! The result was Indian manufacturers could not import intermediate goods or machinery from abroad.

P.S. This post has 2 tags: film and law. It could have been film & economics. Very rare for a Hindi film!