Government hand in private sector

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Government hand in private sector

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

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