Is government intervention necessary in economic crisis?

[deepti1985]

I really think that the need for public intervention is becoming more evident, in the securities market, the housing market or the banking sector -- government intervention would act as a "third line of defence" to support monetary and fiscal policy.

[pahuja.chirag]

your thought came true, government is gonna boost the housing loans, and also it is gonna help automobile industry, as per the today's Times Of India.......................

[deepakraam]

Current crisis in India is mainly due to the negative mood of the people.Ppl are not willing to spend money.They have become spend-thrift.This is good in one aspect but bad in an economic aspect because the money flow in the market will come down drastically.The country will grow only if there is money flow in the market with a proper check on inflation.In 2007,Ppl were ready to spend money in malls so there was enough cash flow in the market.But as the crisis started ppl are not ready to spend the money only if it is required.So there is complete drain in money flow in the market which is not a healthy trend.So Govt is doing its best to increase the money flow so that ppl will spend money thereby changing the mood of the hour.This inturn will make the economy to grow.Ofcourse we must keep an eye on inflation.So Govt intervention is required during economic crisis.

-Deepak.

[janish]

yes,, government must let the market forces lead to future....today all govenments are doing privatization of profits and public of losses............its not gud at all

[mansi_rk]

yes... govt intervention is necessary in such a crisis situations. and govt is goin in right dirction by offering Rs. 31000 crore stimulus package and rate cuts. Though experts feel that it is not suffecient, it wil definitely help businessess a little.

-mansi

[Jairo]

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[khaitansaket]

sometimes govt intervention is must in this crisis as we can see what us govt has done.....it has bailed out a lot otherwise the pvt bodies would have collasssped

[ashvin_1]

if government will not interfere who will decide the economic policy during crisis.....

[ashvin_1]

yes if government will not interfere then who will decide policy during recession....

[phani_tavvala]

U.S government did not interfere during the 1929 stock market crash and later repented. Since then federal reserve was created to interfere in moments of crisis. But government should not turn capitalism to socialism.

[ramudarun]

I really think that the need for public intervention is becoming more evident, in the securities market, the housing market or the banking sector -- government intervention would act as a "third line of defence" to support monetary and fiscal policy.

[kunalseth]

Governments’ roles will change with the financial crisis. On one hand, governments around the world will expand and broaden their scope of responsibility just as they have done in the past. On the other hand, they will reinforce global interdependence, and will see a renewed tendency towards devolution of central power from the center to the edge, according to the point of view by Roopen Roy, Managing Director, Deloitte India.

“Governments will likely respond to the crisis the way many of them have responded to past crises, expanding certain domestic commitments on a deficit basis,” said Roy, who mentioned how the public sector is already extending its reach into the financial and manufacturing sectors, and into infrastructure projects tied to job creation.

The difference from past crises is that a more global government coordination relative to the financial markets will emerge from this crisis. “The spread of credit difficulties from nation to nation, and the concerted effort in some quarters to erect firebreaks further puts to bed the idea that any nation is an island,” added Greg Pellegrino, Deloitte Touche Tohmatsu Global Public Sector Leader, who mentioned the recent efforts by the British and French governments to spur preemptive action by the International Monetary Fund (IMF) on behalf of threatened currencies and stocks in Eastern Europe.

Devolution from national governments to regional and local Governments and to key private-sector industries will be another effect from the financial crisis. What may appear at first glance to be just an expansion of the Government’s involvement, is in fact a redistribution of capital, putting resources on the ground in sectors and communities where they can be put to the greatest use. The challenge however will be whether or not big government can establish effective governance and accountability structures without creating a further drag on the sectors they seek to stabilize.

Common Responses to Deal with the Crisis

According to Greg Pellegrino, governments around the world are not all dealing with the crisis in the same way, although there are common responses based on innovation, reexamination of operational models, and thoughtfully directed support of key public- and private-sector institutions.

“Governments will have to implement rigorous cost reduction programs, increase their operational efficiency, improve their controls, and discover new ways to do more for less, which in turn will spark innovation,” said Pellegrino. “Lean times demand new efficiency, while at the same instant, a public under pressure is demanding more from its government. In fact, many of the more significant government transformations which have taken place have occurred during previous major economic downturns.”

Reexamination of Operational Models

To improve the public sector’s effectiveness, operational models will be revisited: Solutions may lie in consolidation, shared services, cooperation among public services, integration of services across levels of governments, and integration of service provision models.

The relationship between public and private sector operations may also change as a result of the crisis. Public resources that currently return little value, such as abandoned land and buildings, may blossom into productivity under the contractual stewardship of private entrepreneurs. At the same time, an expanded public sector may be more attractive to investors that look for publicly financed private ventures, and better able to negotiate financing terms in some countries. Finally, Governments will find them more willing to consider not only cost concessions but more contract models that peg rewards on the quality of service delivery.

Challenge to Attract Talent

Another example of the do-more-with-less challenge that characterizes the global financial crisis will be to attract talent to work for the public sector because it will offer more challenges with fewer guaranteed comforts. This will make the public service recruitment a transformative opportunity.

“Governments across the globe may emerge from this shift with a new generation of public servants at the helm, people who come to the profession with plans and expectations that differ from those of their predecessors,” said Roopen. “Their approach to playing a part in government will change. Instead of looking for the stability and long term benefits that were appealing to the post-war baby boomer generation, they will be entering the government with the desire to make an impact on things that matter to them, such as energy issues.”

More Infrastructure Projects

Infrastructure will be the great benefactor of the financial crisis as the asset class is the center of attention of the financial industry. In fact, the crisis will have an immediate impact on infrastructure. With securitization constrained, mono lines out of play, and private equity showing poor results, global investors will increase focus on infrastructure, which is relatively resilient because of its risk profile. These projects are large, tangible, stable and predictable at the long term, and revenues from infrastructure projects are fairly inelastic to the wider conditions in an economy as the demand generally remains strong.

“Further infusion of government investment in economic infrastructure is a common response in industrial nations, making manufacturing, telecommunications, transportation, and resources sectors even more appealing in a recovery period,” said Greg Pellegrino.

To keep pace with growth, governments may find that innovative financing strategies, such as public-private partnerships (PPPs), provide a useful alternative. “However,” warns Greg Pellegrino, “infrastructure projects should not be just launched to drive job creation but to invest in economic and sustainable growth”.

Who will pay for Publicly Financed Projects?

The present economic climate presented governments with an opportunity to become more efficient by pushing through administrative reforms “that would not have been possible if there was no economic crisis”.

The financial crisis will also have a negative impact for some projects, especially long-term aspirational goals such as corporate responsibility and environmental protection. “There is no magic strategy that will turn the global financial crisis into an unalloyed positive. However governments worldwide can find the seeds of long term advantage in the decisions they make now” concluded Roopen.

[prasadgoa]

Government intervention is required to formulate and implement new financial policies

[kumarnaresh2003]

Infact yes....I do agree with the statement that goverment should interefere in the financila 7 economic matter during economic crisis...................I really thankful to our privious Fin. Minst. P. C. that he has taken lots of step to handle the Indian economy.

[ishasood]

:kelw: it is necessary, but there are no ways govts is doing so

[ahuja_juhi]

it is only government intervention during times of crisis that can help a country recover.

[tarun_delhionline]

Certainly.Otherwise most of the investors will take their money out of the market in fear.

[manusharma]

PEOPLE BELIEVE THAT WHAT THEY CAN'T GOV. CAN!!!!!!!!!!!!! G.O.I. IS DOING WELL BUT REMEMBER WE ARE LIMITED............

[manusharma]

LIMTED BY FUNDS
LIMITED BY RESOURCE
LIMITED BY INTERNATIONL SUPPORT

SO DON'T COUNT ON Gov. TOTALY

[amnayeem]

govt intervention is necesary but it should be controlled specialyy keeping in mind the monetary and fiscal policy.
the bail outs to the specifgic industries must be carefull

[amnayeem]

govt intervention is necesary but it should be controlled specialyy keeping in mind the monetary and fiscal policy.
the bail outs to the specifgic industries must be carefull

[madronny]

Current crisis in India is mainly due to the negative mood of the people.Ppl are not willing to spend money.They have become spend-thrift.This is good in one aspect but bad in an economic aspect because the money flow in the market will come down drastically.The country will grow only if there is money flow in the market with a proper check on inflation.In 2007,Ppl were ready to spend money in malls so there was enough cash flow in the market.But as the crisis started ppl are not ready to spend the money only if it is required.So there is complete drain in money flow in the market which is not a healthy trend.So Govt is doing its best to increase the money flow so that ppl will spend money thereby changing the mood of the hour.This inturn will make the economy to grow.Ofcourse we must keep an eye on inflation.So Govt intervention is required during economic crisis.

-Deepak.

[gpuneetg]

The government intervention along with corporate and general public is required for economic crisis as all the 3 know their economy well.

[himehul]

In times of Economic crisis the public loses faith on the financial market system, hence government intervention becomes necessary.

[himehul]

Yes government intervention becomes necessary as public loses faith in the financial system..

[khrith]

government intervention is a must, since governement must initiate investing in more projects.

[samiksha_hi]

The government is the ideal interventionist during an eco crises by the mere fact that it has the largest pool of resources that can help steer the economy in the right direction if used in a judicious manner.

Intervention in the form of changes in the rates like the repo/reverse repo/bank rate /int rates etc . will definately have a major imoact on the macroeconomy and help deal with crises.The system of laissez faire is passe and a mixed economy is what saves the show .

[confused21]

when the public loses faith in the market it becomes necessary dor the goverment to intervene, to encourage ppl to invest and continue their practices bcoz its the govt. in the end wich saves the day.

[solutions2k4]

Economic crisis can be relieved only if the NDA Government comes back to power. This is because NDA has the policy to keep interest rates to a minimum level. This helps in economic growth. Although it leads to inflation, but inflation can be controlled by honest groundwork in foodgrain distribution procedure. Congress has always tried to keep interest rates at the roof to keep the saving population happy in order to earn votes. This hampers growth. So this time again if M Singh becomes PM, we should expect recession for the next 5 years.

[ashpt33]

yes......................................

[YogeshTheDevil]

Yes, it is, as a regulator, as a fund-provider in case of emergencies, for setting directions of future business. In short to keep faith of general public in business and even in government itself, it is.

[nameeta15]

thanks guys for all these stuff .............

[nameeta15]

thanks guys for all these stuff .............

[veerugcet]

Yes, offcourse but before it public intervention is must to vote for govt.

[dshawnb]

absolutely!! they charge all them tax, and saved it up in the fiscal, now is the time to spread out some, to salvage people, that's what they did in Australia...couple million has been taken out from government, and distribute to people who pays tax, says trying to stimulate the economic...right.

[sharad.cyberspace]

of course its important, govt is choosen by us any they are responsible for running the country and economy so there intervention is the must to control current economic crises

[Kunlero]

I believe government should intervene by providing infrastructure, social amenities and other social services that help the citizenry and reduce the pressure on them during recession. The government has the responsibility to see to the wee-being of the citizens. Therefore, if the citizens need their intervention, they should go ahead and render it to them. That's why they were elected in the first place.

[kapil21682]

The country's economy is solely in the hands of governement. They can drive it whereever they want to..so their intervention to take the reverse gear back to moving ahead needs a lot of interventions, measures and people participation for innovative ideas to fight this global battle

[neha20092009]

government intervention is a must, since governement must initiate investing in more projects.