Topic: Merits and de-merits of government intervention in Sec A, Group 11

market transactions to help a corporation

Merits
1. Private companies are profit-oriented and do not think about public interest. Government’s
intervention ensures that public interest is upheld while promoting profit making
organizations.

2. Individual citizens do not have enough powers to fight or stand for their rights against big
corporations for their rights and government must intervene to protect the right and
livelihood of its citizens.

3. Big corporations can exploit natural resources for short-term gains and hence government
needs to have some controls in place to check unhealthy exploitations of resources.

4. Government involvement ensures that the growth happens in all sectors of the economy and
not one sector flourishes at the expense of another. Eg: too much focus on manufacturing by
depleting agricultural resources is unhealthy growth.

5. Government facilitates the access of industrial inputs for the manufacturing sector at
discounts leading to lower manufacturing output costs and cheaper access to consumers.

6. Business-friendly policies of government can attract many companies, both foreign and
domestic to invest in nations infrastructure leading to overall national growth and
development.

7. Involvement of government minimizes clashes between land/resource owners and companies

as it acts as a mediator and has a greater degree of control and negotiation power over the
public as compared to the companies.

8. Government involvement in market transactions facilitates in making necessary permits for

the access of resources, setting up of establishments etc., easily available to the companies.
Eg: providing a single window clearance speeds up pre-manufacturing processes and hence
speeds up the overall growth in the sector.

9. Control on taxes by the government also gives a reason why it is good to have government
involved transaction by forgoing its tax revenue from exports to boost the growth of
manufacturing sector by providing domestic companies access to foreign markets at
competitive prices.

10. The intervention of government in facilitating large-scale projects create a large number
of employment opportunities for the youth which in turn positively impacts the distribution
of wealth within the nation.
De-Merits

1. Involvement of government brings in inherent tendencies of corruption. Corporations spend

a lot in giving bribes to politicians and government officials which otherwise could
potentially be invested in other productive activities.
2. The free market is interrupted by the involvement of the government. For example, as the
land acquired by the last few landowners gets expensive due to resource scarcity the owners
get a greater compensation. Due to protests from other landowners who were compensated
at a lower price, government pressurizes companies to increase compensations.
3. Unnecessary delays in important projects due to bureaucracy delays important projects and
hampers speedy growth. A lot of clearances are required to be taken by the corporations
and taking different permissions from different offices consumes a lot of time.
4. When state governments are involved the laws are political motivated and projects which
provide short term benefits to the political vote banks are given priority over actual growth
projects.
5. Favoritism by political party in power for selected organizations and small companies aren’t
given opportunities as available to larger firms who are able to shell out greater money to
the parties in power at central and state governments.