2. Introduction
Multinational enterprises operates in the different areas
around the Globe, and that too under different kinds of
political and legal margins.
This State’s Intervention ensures that the enterprise that
is functioning in their state of the world would have to
operate according to the working environment of that
particular state/area.
3. State Intervention
Reasons for State Intervention.
Types of State Intervention.
Extent of State Intervention.
Consequences of Intervention.
4. Reasons for State Intervention
State's participation is necessary to lay a strong base for the
future development of industry and commerce.
State’s intervention is necessary to eradicate any Monopolistic
economy.
And also due to the Directive Principles Article 38 to 48, following
Rights are given; Right to Equality, Right to Freedom, and Right
against Exploitation of Fundamental Rights makes it mandatory
for the state to participate in the economic activities.
5. Reasons Contd.
What people and country need is understood and
provided by the government and not by private sector.
Markets generally fail and when the market fails the
State should Intervene.
6. Types and Extent of Intervention
Formal interventions: those which emanate from the
legislation. e.g.: the FEMA, the Companies Act,1956etc.
Informal interventions: those which various groups impose
upon themselves out of need and custom.
7. Types and Extent of Intervention
Coercive intervention: It requires performance of certain
actions .e.g. Taxes must be paid otherwise fine or
imprisonment may result.
Inductive interventions: It hold out promise of reward for
compliance with the desired line of action .e.g. Subsidies may
be granted to stimulate certain activities.
8. Types and Extent of Intervention
Direct Intervention: When the government fixes price
of certain products, it is an example of direct
intervention.
Indirect Intervention: The variation of corporate
income tax to influence economic activity is an indirect
intervention.
9. Types and Extent of Intervention
Promotional intervention: It includes activities such as
expansion of public-sector, establishment and
operations of development banks.
Regulatory interventions: It ensures orderly
development of industries with the least wastage of
resources like Industries Act.
10. Consequences of Intervention
There are certain weaknesses in the framing or
administration of control policies that has resulted in the
negative consequences.
Controls have resulted in the wastage of national
resources.
Wastage of time is another consequence of control.
11. Consequences Contd.
Controls have bred corruption at various levels.
Government planning may be more rigid and inflexible than
private decision making because complex decision making
machinery may be involved in government.
Government may be incapable of administering detailed plans.
12. Consequences Contd.
Government controls may block private-sector
individual initiative if there are many bureaucratic
obstacles.
Planning may be manipulated by privileged and
powerful groups that act in their own interest, and
planning creates groups with a vested interest in
planning, for e.g., bureaucrats and industrialist that
obtain protected positions.