GOVERNMENT INTERVENTIONS ON AN ECONOMY

ICFAI BUSINESS SCHOOL HYDERABAD

ACADEMIC YEAR 2021 – 2023

SEMESTER – 01

A REPORT ON IMPACT OF GOVERNMENT INTERVENTIONS ON AN ECONOMY

SUBMITTED BY:

Vaishnavi Chittari 21BSPHH01C1431

Priyankesh Dash 21BSPHH01C0892
Sindhu Paduchuri 21BSPHH01C1230
Hansa agarawal 21BSPHH01C1517
Kairav Bhatt 21BSPHH01C0520
Sumit Ranade 21BSPHH01C1326
Srivathsan Rangaprasad 21BSPHH01C1797

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 GOVERNMENT INTERVENTIONS ON AN ECONOMY

ICFAI BUSINESS SCHOOL HYDERABAD

ACADEMIC YEAR 2021 – 2023

SEMESTER – 01

A REPORT ON IMPACT OF GOVERNMENT INTERVENTIONS ON AN ECONOMY

COURSE: MANAGERIAL ECONOMICS (ME)

COURSE FACULTY: Dr. SUBHENDU DUTTA

DATE OF SUBMISSION: - 15/09/2021

TABLE OF CONTENTS
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 GOVERNMENT INTERVENTIONS ON AN ECONOMY

CHAPTER-1: INTRODUCTION....................................................................................4
Objectives........................................................................................................................................4
Scope...............................................................................................................................................4
Limitations........................................................................................................................................4
Factors taken into considerations.................................................................................................4
Methodology....................................................................................................................................4
Introduction......................................................................................................................................4
CHAPTER – 2: REVIEW OF LITERATURE.................................................................9
CHAPTER – 3: DATA COLLECTION & ANALYSIS..................................................11
Interventions for Development in various Sectors:...................................................................11
Major Governmental Interventions in the Social Sector in Recent Years:............................12
CHAPTER – 4: RESULTS & DISCUSSION...............................................................15
Introduction:................................................................................................................................15
Investments/ Developments:.......................................................................................................15
Road Ahead:..................................................................................................................................15
Advantages in India with 50% Government Intervention:........................................................16
GOVERNMENT INTERVENTION IN THE LABOR MARKET................................................19
CHAPTER – 5: SUMMARY & CONCLUSION...........................................................20
Bibliography and References:....................................................................................21

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 GOVERNMENT INTERVENTIONS ON AN ECONOMY

CHAPTER-1: INTRODUCTION

Objectives
- To understand government interventions in an economy.
- To understand this government inventions across different sectors of the economy.
- To identify the reasons why the government might choose to intervene in market.

Scope
- To understand how the government interventions helped different sectors.
- To understand the advantages of the government interventions in Indian economy.

Limitations
- Data collected is secondary in nature; this might lack the accurate primary information.
- Study has covered only the major sectors in the economy.
- The data collected on this topic is limited due to time constraint.
- The Data is only collected on Indian economy.

Factors taken into considerations

- Different sectors in an economy.
- Advantages and disadvantages of the Government interventions.

Methodology
- Data collected for study is secondary in nature.

Introduction
What is Economics?

Economy, a social science, has an impact on politics, geography, mathematics, sociology,

psychology, engineering, law, medicine, and business. The fundamental goal of economics
is to identify the most reasonable and effective use of resources to fulfill personal and social
goals. Economic issues include production and employment, investment and savings,
health, money and the banking system, government taxation and spending policies,
international trade, industrial organization and regulation, urbanization, environmental
issues, and legal issues (such as the design and enforcement of property rights).

Types of Economics:

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 GOVERNMENT INTERVENTIONS ON AN ECONOMY

There are many distinct types of economies all around the world. Despite the fact that they
all share certain essential characteristics, they each have their own unique characteristics.
Each economy is built on its own set of assumptions and conditions. The four fundamental
types of economic systems are traditional economies, command economies, mixed
economies, and market economies.

1. Traditional Economic System

The traditional economic system is based on the trade of goods, services, and labor that
all follow well-defined patterns. There is minimal division of labor or specialization, and it
is largely reliant on humans. In essence, the traditional economy is the most fundamental
and oldest of the four types. Traditional economic systems may still be found in many
parts of the world. It's particularly common in second- and third-world nations' rural
areas, where agriculture and other traditional income-generating sectors are the
backbone of the economy.

There are typically few resources to share in societies with traditional economic systems.
Either the area has a scarcity of natural resources or access to them is restricted in
some way. As a result, unlike the other three, the traditional system is unable to generate
a surplus. The old economic system, on the other hand, is very viable due to its
fundamental characteristics. Furthermore, because of its low output, there is very little
waste compared to the other three methods.

2. Economic Command System

In a command system, a powerful centralized authority – usually the government – is in

charge of a significant portion of the economy. Because the government makes
production decisions, the command economic system, also known as a planned
economy, is commonly employed in communist countries. A command economy is more
likely to exist in a resource-rich economy. The government intervenes in this
circumstance and seizes control of the resources. For valuable resources such as gold
or oil, centralized control is desirable. People govern other, less important aspects of the
economy, such as agriculture. In theory, the command system works exceptionally well
as long as the central authorities exercise authority in the general public's best interests.
This does not appear to be the case very often, though. Command economies are rigid
in compared to other systems. Because power is concentrated, they are sluggish to
adapt to change. Because they are unable to adjust quickly to changing conditions, they
are prone to economic crises or scenarios.

3. The Free Market Economy

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 GOVERNMENT INTERVENTIONS ON AN ECONOMY

Market economic systems are based on the concept of free markets. In other words, the
government is mostly uninvolved. The government has very limited control over
resources and stays out of key economic areas. Individuals and the supply-demand
relationship, rather, are the origins of regulation. The majority of the market economy is
based on theory. To put it another way, a pure market system does not exist. Why? After
all, all economic systems are subject to central government interference in some way.
For example, most nations have legislation to regulate fair trade and monopolies.

A market economy allows for substantial development from a theoretical perspective. It

is believed that a market economic system provides the highest growth. The most major
disadvantage of a market economy is that it allows private entities, particularly those with
substantial resources, to amass tremendous economic power. Because the wealthiest
individuals control the bulk of resources, the distribution is inequitable.

4. Mixed System

Mixed systems blend market characteristics with commanding economic systems.

Because of this, mixed systems are sometimes referred to as dual systems. The word is
often used to describe a tightly controlled market system. In the Western Hemisphere,
several emerging countries are using a mixed strategy. The bulk of the industries are
private, with government services accounting for the majority of the rest. Mixed systems
are the norm across the world. According to mythology, a hybrid system combines the
best features of both the market and command systems. Mixed systems are the norm
across the world. The best features of both market and command systems are believed
to be combined in a hybrid system. Mixed economies, on the other hand, have a hard
time striking the right balance between free markets and government regulation.
Governments have a habit of exerting considerably more control than is necessary.

Economics is a very personal subject (Microeconomics)

Microeconomics is a branch of economics that studies the consequences of individual

human activities and is critical to one's financial well-being. Personal resources are restricted
as well! A dollar, an hour of time, or a new skill may all be put to good use. It's essential to
make the best use of one's resources, and comprehending resource allocation issues
improves one's ability to make daily and long-term decisions. Some common day-to-day
economics concerns include: Should I purchase, borrow, or lease that new vehicle? Should I
take out a home equity loan or invest in the stock market?

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Economics is Universal (Macroeconomics)

Macroeconomics is the study of how the economy as a whole functions, including inflation,
price levels, growth rates, national income, gross domestic product, and variations in
employment rates. “Why are so many people gainfully employed in a country as wealthy as
the United States?” is one of the key issues that American economists strive to address. And
“Who decides how much money circulates in the United States?” A solid grasp of
macroeconomics has a significant influence on leadership abilities, decision-making, and the
ability to prepare for a prosperous social future for everyone from politicians to educators to
journalists to urban planners.

Government intervention

Economic interventionism, sometimes referred to as state interventionism, is an economic

policy approach that argues for government intervention in the market process to remedy
market failures and enhance public welfare. In a market economy, an economic intervention
is a government or international agency activity that affects the economy beyond the core
controls of fraud, contract enforcement, and provision of public goods and services.
Economic intervention may be used to achieve a variety of political and economic goals,
including boosting economic development, creating employment, raising salaries, raising or
lowering prices, promoting income equality, and controlling the market.

Public versus Private Goods

In the case of some products in an economy, it is feasible to restrict the number of

consumers who use these things by raising costs so that those who cannot afford to buy
them do not. As a result, these goods become divisible in terms of the number of people who
use them. We may argue that the capacity to price this products is divisible and the
exclusion principle all go together since this goods can be priced and the principle of
exclusion can be applied to those who cannot pay the market price. Public goods are goods
that cannot be divided or seen. For example, any individual, regardless of whether or not he
pays taxes, is entitled to use street lights, roads, and paths.

Marginal Cost

An important characteristic of a pure public good is that its marginal cost would be zero that
implies that the additional member of off the society can be benefited by its use without
adding much to its total cost the use of a pure public code buy one more member of the
society it does not reduce its availability to others.

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Need of Government Intervention:

An economy, whether communist, mixed, or open, should ensure that all those willing to
work at a privileged wage rate are employed, and that those who are working are paid
according to their contribution to total productivity factors of production are optimally
distributed among the various industries, and that the entire population receives sufficient
income to cover at least basic needs.

The free-market system has failed to satisfy the aforementioned expectations, as the world
has recognised. The collapse of the free system has resulted in the following consequences:

Income and wealth inequality is caused by the market process, which causes income and
wealth to be concentrated in a few hands. It is simple to obtain wealth for those who have
productive resources and mental capacity.

The emergence of monopolies in a free system occurs when businesses with extraordinary
organisational abilities take over unsuccessful ones, resulting in the formation of monopolies.
The market economy does not guarantee full employment if it fails to supply it.

Instability is caused by an imbalance in which millions of buyers and sellers make their own
separate decisions, resulting in frictional distribution and cyclic booms and depressions.

The market economy is in its early stages. The resource of production stays unutilized
anytime the market system is depressed. This productive resource has the potential to be a
source of income for the impoverished. Two, indifference to social welfare and the sacrifice
of social welfare in a market, when the primary goal is to maximise profit, no one gives a
damn about social welfare. Due to the presence of externalities, there has been a great
technical environment that has resulted in a diversification of social and private cost and
benefits poverty in the midst of plenty in an economy founded on the concept of private profit
maximisation. This has resulted in a massive increase in output.

Government Intervention in India:

A wide range of measures are in place to stabilize economy and reduce the gap between
rich and poor.

Fiscal Measures: To decrease the budgetary and revenue deficits, the Indian government
has tight control over its own spending. In 1984, the government launched a package
programme to curtail public spending and postpone new government job recruitment. To
minimise the economic deficit, the government has reduced the size of ministries since
1991. The RBI's monetary policy includes significant use of both general and selective

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control credit. The major focus has been on limiting bank lending against sensitive
commodities inflammation and influencing the cost and availability of commercial bank
credit. To maintain control over liquidity and expansion, the CRR was increased from 6% to
15%.

Supply chain management: To linked to supply and distribution system volume. The
government has concentrated its efforts on gaining more control over the pricing of wheat,
rice, sugar, oils, and other consumer goods. Among the main steps taken by the government
are:

Fixing a maximum price for food grains to eliminate incentives for hoarding and speculative
activities the maximum wholesale and retail price of food grains has been set by the
government. It also establishes a maximum purchase price for the primary crop in order to
safeguard farmers' interests. Under the dual-price system, key items of consumption are
made available to individuals living below the poverty line at subsidy rates.

Adoption of Open general license (OGL): It is a crucial strategy for adjusting imports of
sugar and pulses in the trade and tariff policies of the central government budgets to keep
domestic industrial product pricing competitive. A significant drop in excise duties on a
variety of products is projected to hasten the pace of industrial recovery and expansion. A
variety of laws have been enacted to safeguard the interests of customers, and those who
are found guilty of any type of fraud activity face severe penalties.

A variety of laws are also in place to preserve the environment, including environmental,
water, and air pollution, as well as to raise worldwide awareness about environmental
conservation and to provide different incentives.

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CHAPTER – 2: REVIEW OF LITERATURE

1. With the pandemic the government intervention policies have helped economically in
various countries across the globe. Centralized quarantines, lockdowns, school
closures also with helping the country to choose the affordable measures for an
economy in order to maintain the balance in an economy between the benefits and
also the cost of overall economy. The government tried to do their bet but the
research insists the government to look into the interventions by replacing the costly
ones without significant ones to affordable policies of the economy. Also, with
currently experiencing the pandemic it is imperative to customize their choice of the
government intervention policies to be able to provide useful insights for different
counties or regions for future pandemics.
- Xiaohui Chen, Ziyi Qiu 

2. This article provides the analytical approach for studying the role of the government
in market transformation. The government may involve in the economic activities of
with market players only with the role of benefit sharing but it may also bring
transaction disputes, risk sharing. The role of the government is not defined well also
has impacted the interaction between the market players and the government, the
government intervenes in transaction disputes and which results risk transformation
behavior of the market players which is situational.
- The Journal of Chinese Sociology

3. The market imperfections can be fixed or compensated by Government interventions.

When the crisis of the 1997’s prove that the interventions of the government is
required for the betterment of the economy. The strategy and the policies are directly
related to the environment volatility and to government interventions too in an
economy. When the strategies change the customers’ reaction and the market
reaction has to be considered. The Government’s intervention maintains the harmony
and order of the business and the general economic environment to their market
requirements and the international standards but with all the government
interventions the equilibrium between the market and the government’s forces has to
be maintained.
- Oriana DOVAL & Elena DOVAL
4. The Government has the power to make huge changes with monetary and fiscal
policy, including the increase and decrease the interest rates which will impact the

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business a lot. The government can also boost the currency and also temporarily
help to lift the corporate profits and share prices and bring them down when the
interest rates spike. Governments can intervene when the companies or the
organizations are flailing or undermining the economic system by bailing them out.
Government can also create the subsides, tax the public and give the money to a
industry when it needs or when it comes to tariffs adding taxes to exports and imports
or make the domestic products appealing to the foreign market.

- Mary Hall

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CHAPTER – 3: DATA COLLECTION & ANALYSIS

Interventions for Development in various Sectors:

 In recent years, social development has taken on a new prominence in development
theory. During the 1950s and 1980s, progress was primarily assessed in terms of
material wealth accumulation and was quantified in terms of GDP growth rate.
Economic development was formerly thought to be a function of capital inputs.
 Economic policy's principal goal was to deploy the resources needed to achieve a
targeted rate of growth. Accelerating the rate of economic growth was expected to
solve both economic and social concerns.
 Even after the 1980s, when development thinking underwent a paradigm shift with a
focus on human development, social development, inclusive development, and
sustainable development, India's social sector development suffered as a result of
the government's preoccupation with implementing economic reforms as part of a
market-based governance approach.
 There had been an overemphasis on fiscal balance correction at the expense of
social development. In reality, the state began to scale back its constitutional
obligation for delivering "public goods" in such critical sectors as education, health,
housing, sanitation, and so on as a deliberate strategy.
 This task was progressively being delegated to private-sector businesses. As a
result, the poorest and most disadvantaged people's lives have deteriorated
dramatically, notably for SCs, STs, women, minorities, children, and others.
 Nonetheless, beginning with the 9th Five-Year Plan, the Government of India began
emphasising the implementation of certain Basic Minimum Services (BMS) for the
benefit of the general public, such as:

 Provision of safe drinking water,

 Access to primary health facilities and services,
 Universal applicability of primary education,
 Public housing assistance to homeless poor families,
 Nutritional support for children, and connectivity.
 Even modern developmental economists like Mahboob-ul-Haq, Amartya Sen, Joseph
Stieglitz, and others began to emphasise governance shortcomings in terms of
human and social development in the developing world, including India, around this
time. Prof. Amartya Sen believes that investment in the social sector will increase the
freedom of individuals and social groupings.

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 The global community pushed for a new agenda for social development at the turn of
the millennium in the form of MDGs (Millennium Developmental Goals), which
emphasised poverty alleviation, creating a disease-free world community, providing
universal primary education, promoting gender equality and women's empowerment,
and so on.
 The following elements are included in the growth of the social sector:
 Poverty alleviation and employment creation
 Education is open to everyone.
 Improved access to health care facilities and public health
 Rural infrastructure development, such as rural roads, housing, sanitation,
clean drinking water, power, and so on.
 For a better living, it is necessary to improve one's skills.
 Enhanced social security
 Development of the country's backward regions/districts

Major Governmental Interventions in the Social Sector in Recent Years:

 HEALTH:
 Ayushman Bharat program
 National Health Mission
 National Rural Health Mission
 JSY (Janani Suraksha Yojana)
 Universal Immunization Programme
 National Vector-Borne Disease Control Programme
 PMSSY (Pradhan Mantri Swasthya Suraksha Yojana)
 AYUSH (Ayurveda, Yoga & Naturopathy, Unani, Siddhi, Homoeopathy)
 EDUCATION:
 SHREYAS (Scheme for Higher Education Youth in Apprenticeship and
Skills)
 National Educational Alliance for Technology (NEAT)
 RTE (Right to Education)
 SSA (Sarva Shiksha Abhiyan)
 MDMS (Mid-Day Meal Scheme)
 Sakshar Bharat (National Mission on Female Literacy – an adult education
program)
 RMSY (Rashtriya Madhyamik Shiksha Abhiyan)
 Model School Scheme

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 RUSA (Rashtriya Uchchatar Shiksha Abhiyan)

 RURAL DEVELOPMENT:
 Poverty Alleviation through Rural Employment (for Livelihood Security)
 MGNREGA – implemented by the Ministry of Rural Development
(MoRD)
 NRLM/Aajeevika (formerly SJGSY) – implemented by MoRD
 Development of Critical Infrastructure in Rural areas
 IAY for Housing (Indira Aawas Yojana) – implemented by MoRD
 PMGSY for Rural Roads (Pradhan Mantri Gram Sadak Yojana) –
implemented by MoRD
 RGGVY for Rural Electrification (Rajiv Gandhi Gramin Vidyutikaran
Yojana) implemented by the Ministry of Power
 NRDWP for Rural drinking water supply (National Rural Drinking
Water Programme) – implemented by MoRD
 TSC/NBA for Rural Sanitation (Total Sanitation Campaign) –
implemented by MoRD
 AIBP for Irrigation (Accelerated Irrigation Benefit Programme) –
implemented by Ministry of Water Resources
 NLRMP (National Land Records Modernisation Programme)
 Agricultural Development
 RKVY for Agricultural development – implemented by the Ministry of
Agriculture
 Area Development
 IWMP (Integrated Watershed Management Programme)

 URBAN DEVELOPMENT:
 Urban Infrastructure Development
 Smart Cities 
 JNNURM – implemented by Ministry of Urban Development &
Ministry of Housing and Poverty Alleviation
 ILCSS (Integrated Low-Cost Sanitation Scheme)
 Housing & Urban poverty alleviation through employment generation
 Housing for all
 Affordable Housing Fund scheme
 RAY (Rajiv Aawas Yojana)

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 SJSRY (Swarna Jayanti Shahri Rozgar Yojana; now restructured as

NULM under the 12th Plan) -implemented by Ministry of Housing &
Poverty Alleviation

 WOMEN & CHILD DEVELOPMENT:

 Pradhan Mantri Matru Vandana Yojana
 Beti Bachao Beti Padhao Scheme
 Poshan Abhiyaan /National Nutrition Mission
 ICDS – – implemented by MoWCD 
 Sabala/RGSEAG (Rajiv Gandhi Scheme for Empowerment of Adolescent
Girls)
 IGMSY (Indira Gandhi Matritva Sahyog Yojana)
 NMEW (National Mission for Empowerment of Women)
 RMK (Rashtriya Mahila Kosha)
 Policies to address violence against women, e,g (PWDVA)

 SKILL DEVELOPMENT
 National Skill Development Mission
 Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
 UDAAN- to provide skills training and enhance the employability of
unemployed youth of J&K.
 SANKALP(Skills Acquisition and Knowledge Awareness for Livelihood
Promotion ) and STRIVE (Skill Strengthening for Industrial Value
Enhancement)

 SOCIAL SECURITY
 PM Kisan Maan Dhan Yojana
 Atal Pension Yojana
 AABY (Aam Aadmi Beema Yojana)
 RSBY (Rashtriya Swasthya Beema Yojana)
 SSA (Social Security Agreements)
 The Unorganized Workers Social Security Act, 2008NSAP (National Social
Assistance Programme)

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CHAPTER – 4: RESULTS & DISCUSSION

Introduction:
The fast-moving consumer goods (FMCG) industry is India's fourth-largest, with household
and personal care products accounting for half of all FMCG sales. The sector's main growth
drivers have been increased awareness, greater access, and changing lifestyles. The urban
segment (which accounts for roughly 55 percent of the total income generated by the FMCG
industry in India) is the most important contributor to the overall revenue earned by the
sector. However, in recent years, rural India's FMCG sector has expanded at a quicker rate
than urban India's. Semi-urban and rural areas are rapidly expanding, with FMCG items
accounting for half of all rural expenditure.

Investments/ Developments:
The government has approved 100 percent FDI in food processing and single-brand retail,
as well as 51 percent FDI in multi-brand retail. This will increase FMCG brand employment,
supply chain visibility, and high visibility in organized retail marketplaces, boosting consumer
spending and driving additional product releases. From April 2000 to March 2021, the sector
had robust FDI inflows of US$ 18.19 billion.
The following are some recent advancements in the FMCG sector:

Road Ahead:
Consumption in rural areas has risen, owing to a mix of rising income and higher ambition
levels. In rural India, there is a growing desire for branded goods.
On the other hand, as the unorganized market share in the FMCG sector declines, the
organized sector is anticipated to expand faster as brand awareness rises, aided by the
expansion of contemporary retail.
The rising young population, particularly in metropolitan areas, is another key element
driving demand for culinary services in India. Due to time restrictions, India's youthful
customers, who make up the bulk of the workforce, seldom, have time to cook.
Companies attempting to reach the hinterlands are anticipated to rely heavily on online
portals. The Internet has made a significant contribution, allowing for a more cost-effective
and easy method of expanding a company's reach. By 2025, India's internet users are
expected to exceed 1 billion. By 2020, it is expected that 40% of all FMCG consumption in
India would be done online. From US$ 20 billion in 2017, the online FMCG industry is
expected to grow to US$ 45 billion in 2020.
India is expected to gain $15 billion per year from the implementation of GST. Both in the
rural and urban areas, GST and demonetization are likely to boost demand and metropolitan

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regions, as well as long-term, structured economic growth and better performance of firms in
the industry.
• The Union Cabinet authorized the production-linked incentive (PLI) programme in ten
important sectors (including electronics and white goods) on November 11, 2020, in order to
improve India's manufacturing capabilities, exports, and promote the "Atmanirbhar Bharat"
agenda.
• Changes in the packaged food business will result in higher prices for farmers and a
reduction in waste levels. Unique product lines with significant development potential and the
ability to produce medium- to large-scale jobs have been formed to give assistance under
the PLI plan.
• The Indian government has allowed 100 percent FDI in cash and carry and single-brand
retail, as well as 51 percent FDI in multi-brand retail.
• The government has prepared a new Consumer Protection Bill with a focus on establishing
a comprehensive system to ensure that consumers receive justice in a simple, quick,
accessible, cheap, and timely manner.
• The Goods and Services Tax (GST) benefits the FMCG business since numerous FMCG
items, such as soap, toothpaste, and hair oil, are now taxed at 18 percent instead of the
previous rate of 23-24 percent. In addition, the GST rate on food and hygiene goods has
been decreased to 0-5 percent and 12-18 percent, respectively.

• As many big businesses redesign their operations into larger logistics, GST is projected to
change logistics in the FMCG sector into a contemporary and efficient model.

Advantages in India with 50% Government Intervention:

1. Increasing Demand

a. The Indian FMCG market is anticipated to grow at a CAGR of 14.9 percent to $220 billion
by 2020.

b. By 2025, the Indian packaged food market is anticipated to treble to $70 billion.

c. The Indian processed food market is expected to grow from $263 billion in 2019-20 to
$470 billion by 2025.

2. Interesting Possibilities

a. Rural India's rising disposable income and low penetration levels in the rural market
provide space for expansion.

3. Policy Support

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a. foreign equity investment approval of up to 100% in single-brand retail and 51% in multi-
brand retail.

b. The union government's production-linked incentive (PLI) program provides businesses

with a significant chance to increase exports.

c. To encourage investment in the food processing industry, the Union Cabinet authorized
the PLI program. 4. Increased Investments a. Investors are drawn to this industry since
FMCG items are in high demand all year. From April 2000 to March 2021, the sector
received a robust $18.19 billion in FDI.

Capitalism

Pure capitalism states that the less government intervention in the market, the better off
people, firms and the overall economy are. Laissez-faire approximately translates to "let do"
or "let alone" in French. In other words, there are no government checks and balances,
rules, or controls. Property owners—including those who own machinery, capital, and other
input resources—can contract and trade with each other as they see fit under this extreme
version of capitalism, regardless of government demands.

The Role of Competition:

The term "competition" refers to a process in which providers compete for business.
Suppliers can compete in a variety of ways, including improving the quality of existing items,
employing entrepreneurial talents, and investing in research to produce new goods and
services. Some of the competitive procedures can also be used in the public sector.

Competition:

• Encourages businesses to enhance internal efficiency and cut expenses. Cost-cutting

helps businesses to provide the same goods and services to customers at a reduced cost.
This will attract a bigger number of customers, resulting in a higher market share for the
company. And if there is no government to regulate it, prices might become too low or too
expensive for sales, thus controlling the market.

• Because the private sector is more competitive, which is the essence of a capitalistic
economy; it creates incentives for businesses to engage in innovation. Firms can enhance
the quality of their present products and/or develop new products and services by investing
in innovation to meet evolving customer demands and desires.

Advantages in USA with Minimal Government Intervention:

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According to the FMCG manufacturing association, the US CPG sector was valued $2.1
trillion in 2011, employing 14 million Americans and adding over $1 trillion to the economy.

According to the results of a survey of the sector, there has been a 4.9 percent gain,
indicating that the business has grown well even without government involvement.

The worldwide FMCG market is estimated to be worth more than $10 trillion, or one-seventh
of the global economy. This demonstrates that even with minimal or near-zero intervention,
FMCG growth increases, taking into account the market's age.

In a capitalist economy where the private sector dominates the market, India's growth is
accompanied with increased innovation. It provides the country and the market in the
country a lot of freedom because it is not dependent on research or any other budget.

Government Intervention in the Health Care Market

In order to understand why governments, intervene more frequently and directly in health
care markets, it is essential in the first instance to consider the nature and the function of the
marketplace. For most commodities (including food), the market performs a simple function
that permits buyers and sellers to exchange a good or service for a fee.

Free markets therefore allow the price of the good or service to be determined by:

(1) Supply and demand; and

(2) Resources available.

Prices for food products are agreed by both the buyer and the seller with supply and demand
dictating the pattern of the interchange between the consumer and the producer. Viewed
from this perspective, in a free market place (i.e. a marketplace that is characterised by an
absence of government intervention) consumers are sovereign. Consumers are thus free to
make choices and producers respond in kind.

However, the health care market is fundamentally different from food and other commodities
that are bought and sold in the marketplace.

Two points in particular are apparent. Firstly, when a consumer becomes seriously ill and
needs to enter the health care marketplace, the costs of goods and services are likely to be
extremely high.

For example, for the vast majority of consumers, the costs of complex surgery will far
exceed what the customer is able to afford. Thus, consumers in the health care market place

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are not sovereign economic actors as they are in food markets where hunger is alleviated
according to what kind of food the consumer can afford.

Secondly, unlike consumers of food, health care consumers cannot predict when they will
become sick or what their future health care needs might be. Therefore, consumption in the
health care market is not determined by choice but, rather, by uncertainty.

GOVERNMENT INTERVENTION IN THE LABOR MARKET

The labor market is the biggest market in any economy. Forget supply and demand; if there
is no labor, then such an economy has no future. Besides, it is the only market that is found
in every other market.

For a company to be successful and go anywhere, there needs workers who are qualified
enough to provide the labor they need. If they don’t get these workers, they have no way to
ensure their business’s success. In any other market, firms are the suppliers, and
households are the consumers. But things change in the labor market where households
become the supply, and the firms are consumers. In other words, companies offer demand.

A private firm will always come up with its own employments policies and agreements
between them and their employees. They determine how to employ workers, and in many
cases, fire them based on different cases. Creating a good relationship between a firm and
the people that run their production lines is one of the best ways to ensure success.

Despite it being a private issue, there are many instances where the government intervenes
in the labour market.

First, there are certain jobs that the government provides for public servants, who are
elected or employed to serve the common citizen. In more developed countries, the
government is the largest contributor to the labor market. They employ more people than the
private sector.

Unemployment is one of the biggest threats to economic growth and development. Hence, a
government needs to ensure that there are proper laws a guideline on how people are
employed, paid, and or fired. Without these policies, many economies would not go far, and
governments would fail. Therefore, it is always a good idea to have some form of
intervention that ensures this crucial market is always in check.

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Example-In Europe, government intervention in how people get jobs and how firms employ
is a common area. For instance, there are so many examples of restrictions on hiring, firing,
closing companies, and many other things that relate directly to firs' operation. There are
some restrictions that are much similar to what happens in the USA, but not as much as
what happens in the European region. One main reason for this phenomenon is that public
opinion highly supports such restrictions than they do in the US.

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CHAPTER – 5: SUMMARY & CONCLUSION

 The Government intervention has a good impact to the country where its people
oriented & combats market inequalities through regulation, taxation & subsidies. The
citizens are fully dependent on the government in terms of administration and market
regulation.
 It is also seen that with minimal government intervention there is a scope of
innovation & flexibility allowing new creations. A correct mixture of centralization and
decentralization in terms of policy formulation will help an economy to grow faster.
 Government may also intervene in markets to promote general economic fairness;
The power of government intervention can be seen in the long run if correct
ingredients are added to the economy.
 The agriculture sector contributing majorly to India’s GDP has seen a significant
amount of government interventions and some of which have been extremely
beneficial.
 The economy as a whole will have major policy changes like demonetization and
GST, etc. which are solid long run contributors which help the economy to build firmly
and grow in a rapid pace.

Bibliography and References:

 Media Reports, Press Information Bureau (PIB), Firstpost
 Adam Smith. 1776. “The Wealth of Nations”
  Almanac of Policy Issues "Capital Punishment 2000", Almanac of Policy Issues, September 23,
2004, accessed March 21, 2011.
 ^ Almanac of Policy Issues. "Drug Abuse in America:2001", Almanac of Policy Issues, September
23, 2004, accessed March 21, 2011.
 ^ Almanac of Policy Issues "Gun Control", Almanac of Policy Issues, September 23, 2004,
accessed March 21, 2011.
 ^ Almanac of Policy Issues "Abortion Law Development: A Brief Overview"Archived 2011-05-14 at
the Wayback Machine, Almanac of Policy Issues, September 23, 2004, accessed March 21, 2011.
 ^ Almanac of Policy Issues "Arts and humanities", Almanac of Policy Issues, September 23, 2004,
accessed March 21, 2011.
 ^ Almanac of Policy Issues "Federal Anti-Discrimination Laws", Almanac of Policy Issues,
September 23, 2004, accessed March 21, 2011.
 ^ Almanac of Policy Issues "Budget and Taxes", Almanac of Policy Issues, September 23, 2004,
accessed March 30, 2011.
 ^ Almanac of Policy Issues "The State of U.S. Education", Almanac of Policy Issues, September
23, 2004, accessed March 30, 2011.

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