By Prasanth Narayanan Priyanka Gaikwad

OBJECTIVES OF INTERVENTION TYPES OF INTERVENTION IMPACT OF INTERVENTION (-’ves) CONCLUSION

OBJECTIVES OF INTERVENTION

TYPES OF INTERVENTION

IMPACT OF INTERVENTION (-’ves)

CONCLUSION

Respond to market failures Limit market power abuse Improve economic efficiency Provide for “Public Goods” Intervention on “Public Interest”

Respond to market failures

Limit market power abuse

Improve economic efficiency

Provide for “Public Goods”

Intervention on “Public Interest”

Behavioural Modify the economic demeanor Price Regulation Prohibition orders Structural Intervention with Structure of organisation Prevention of mergers Forced Separation/splitting of organizations

Behavioural

Modify the economic demeanor

Price Regulation

Prohibition orders

Structural

Intervention with Structure of organisation

Prevention of mergers

Forced Separation/splitting of organizations

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

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

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

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

70% of requirements imported Prices of crude oil spiralling up Policies->complex web around petro-sector Retail trade in shambles Apparent ‘strain’ on government finances

70% of requirements imported

Prices of crude oil spiralling up

Policies->complex web around petro-sector

Retail trade in shambles

Apparent ‘strain’ on government finances

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

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

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

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

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

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

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

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

Very Very Limited intervention Only respond to Market failures Restriction of monopoly Other such situations In all other cases leave the economy alone!

Very Very Limited intervention

Only respond to

Market failures

Restriction of monopoly

Other such situations

In all other cases leave the economy alone!