State into inndustries

1. Rationale and Extent of
State Intervention
SUBMITTED BY: NITISH
SADOTRA

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.

13. Thank
You !!