government hand in private sector
TRANSCRIPT
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By By Prasanth NarayananPrasanth NarayananPriyanka GaikwadPriyanka Gaikwad
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OBJECTIVES OF INTERVENTION TYPES OF INTERVENTION IMPACT OF INTERVENTION (-’ves) CONCLUSION
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Respond to market failures Limit market power abuse Improve economic efficiency Provide for “Public Goods” Intervention on “Public Interest”
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Behavioural–Modify the economic demeanor–Price Regulation–Prohibition orders
Structural–Intervention with Structure of organisation–Prevention of mergers–Forced Separation/splitting of organizations
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INTERVENTION AND ECONOMIC GROWTH Govt usually intervenes to provide “public
goods” But with more of intervention, agenda is no
longer economically driven Tax money is diverted to inefficient
industries Diminishing returns to investment “LAG” of government policies
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The initial aim might have been good Government treats PSUs as investments Disinvestment is mostly feasible for profit
making units Loss making units are generally kept alive
on life-support Privatisation of profit and Nationalising
losses
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70% of requirements importedPrices of crude oil spiralling upPolicies->complex web around petro-sectorRetail trade in shamblesApparent ‘strain’ on government finances
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Large amount from the oil sector-> indirect taxes
Total revenue Rs 1,10,000 crore in 2003-’04 Paid by public India's levies on oil are high Additional ‘cess’ on indigenously produced crude
State-run PSUs make considerable profits due to monopolistic practices
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Changes in food habits Shortage of edible oils resulting in imports
Pulse deficit – reflected in imports and increase in domestic prices
Declining cereal availability =>Due to accretion to stock of cereals held by government agencies
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Policies not been changed to adjust to new situations
Accumulation of huge grain stocks Increase in food subsidy bill Neglect of efficiency and quality Setback to private trade Strong regional bias in government support to agriculture
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Set up if general social welfare increases
Modus measurement of welfare is flawed
PSU’s are generally not the most efficient institutions
Huge influx of money
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Very Very Limited intervention Only respond to
◦Market failures◦Restriction of monopoly◦Other such situations
In all other cases leave the economy alone!
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