Name: Subarna Sahoo

Roll No: 2211349

Should the Indian government play an active role in innovation and investment in risky portfolios?

India’s economy has grown significantly in recent years. Particularly, three waves of consistent, pro-
market reforms in the 1980s, 1990s, and 2000s have contributed to the development of a remarkable
growth dynamic. To determine whether or not the government should play an active role in innovation
and invest in risky portfolios, we consider a number of factors, as discussed below:

Advantages
1. Social impact - The government can support innovation and investment in risky portfolios that
have the potential to address key societal challenges, such as the need for a clean
environment. Some of these innovations could trigger economic growth which in turn could
mitigate divisions on caste and religion. By overcoming these challenges, the overall welfare
of the citizens improves.
2. Economic Growth - Innovation and investment in risky portfolios can drive economic growth
and create jobs. This is important for a rapidly developing country like India which needs to
create jobs for a large sector of its population, involved in unorganised labour. The creation
of additional employment opportunities in the manufacturing sector, for example, helps avoid
precocious servicification.
3. Welfarism - Since 2014, the government's affirmative strategy has changed to focus on
providing the poor with basic private goods and services including bank accounts, housing,
etc. The government has responded by funding numerous welfare projects and encouraging
innovation through initiatives like "Startup India". This will lead to increased economic growth
and national self-sufficiency.
4. Bridging Incommensurate Development - India's overall pattern of development has not
been proportional in a number of areas, including fair employment opportunities, growth
distribution by geography, caste, and religion. Government may remove this disparity by
bringing uniform development across the sectors through its investment in newer
innovations.
5. Global competitiveness - By investing in innovation and risky portfolios, the Indian
government can help Indian companies become more competitive on the global stage. This
can help attract foreign investment and create opportunities for Indian businesses to expand
overseas.

Risks
1. Risk and rewards: For every successful investment in a risky portfolio the government will
have to bet on several unsuccessful ventures. For a developing country like India that might
not be such a lucrative option, given that the tax payer’s money is at stake.
2. Societal Change: Traditionally India has had a lower acceptance to innovation, this culture
could be a barrier to potential investment in risky portfolio.
3. Reduction in welfare: In case the government faces huge losses in its risky investments, it
might have to reduce the expenditure on several public welfare schemes. This would result in
a decrease in the overall welfare of citizens.
4. Misallocation of the benefits: Because of the greater corruption rate in India, larger, richer
regions might benefit more than the smaller, poorer ones.

Finally, India's growing population and increasing economic challenges need to be addressed
by sustainable economic growth, investing in innovation could allow India to be independent
on technology, energy and services.