Government Interventions Work Temporarily

Government Interventions Work Temporarily

The Government intervenes to ensure economic development at higher rate but the interventions work temporarily. What to do for permanent solution to economic problems?

Each government intervenes through various measures of fiscal and monetary policy to ensure the economic development of their economy. The interventions improve the situation as per the desire of the government but not bring a permanent change. What can bring the permanent change and how policymakers of India can perform in today’s scenario?

The Control over Social Media Platforms in India:

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 were formed and released by the Ministry of Electronics and Information Technology (MeitY) in February, 2021. 
The Government gave three months time to compliance these rules to the Social Media intermediaries. There are seven major Social Media intermediaries in India i.e. Google, Facebook, WhatsApp, Telegram, Koo, Sharechat, and LinkedIn. As per new norms, a resident of India would be Grievance Redressal Officer for timely resolutions of the grivances of the users of social media platforms. Further, a Chief Compliance Officer will also be appointed for ensuring compliance of IT Act and Rules and there will be a monthly compliance report be prepared with the details of complaints received and action taken. 
No doubt, the rules are challenged on basis of freedom of speech and expression in India, but keeping in view the national security many experts favoured to implement the Act and Rules. The fake news are affecting the life of common men and users of social media. There are many instances when abusive language is used on the social media and automatic system of complaints not worked properly to block or take action upon the persons responsible for it. The mob violence is also due to misuse of social media platforms. Now after receiving complaints, the technological companies have to remove the reported content within 24 hours. Even first originator of information will also be identified by the companies. However, the tracibility of such originators is really difficult and tedious task required to be done by the social media intermediaries that is why a few are hesitating to implement such rules. 
This intervention of Government will work to control the misuse of the social media platforms but at the same time will affect the free speech, which is a basic tenet of Indian Democracy.

Why it is bad to safeguard economy through interventions?

The intervention of central banks of countries to safeguard their currencies can work in appreciating or depreciating the value of the currencies but such changes are temporary. The issue of securities by the United States of America for appreciating the value of Dollar and in order to pay higher rate of returns upon issued securities, the USA has to perform for higher rate of return which will cost the economy and its citizens. Ultimately, the current account deficit (CAD) of the country will rise due to this particular step and to correct the situation, the USA’s Dollar will automatically depreciate. What can be the best strategy to improve the value of currency? How without any intervention, the currency can be appreciated or depreciated? The monetary and fiscal policies of the countries make temporary changes in the value of the currencies, then what can be done for bringing the permanent change? How China is competing with the world without making such interventions, is a lesson for the other countries.

In India, during 2018-19 and 2019-20, it is felt that the economic growth became stagnant and prices also started rising. Such condition of economy is known as "Stagflation". In such case, how Government intervene?

There was 7.35% rise in the consumer price during December 2019 due to rising prices of Onions, Potatoes etc; the temporary intervention to buy onions and selling through depots worked to control the inflation but it harm the 'free market conditions' and the business men suffered from losses due to lower sale of their procured onions. The Reserve Bank of India (RBI) became under pressure to cut the rates for improving the liquidity in the economy but due to Stagflation and fears of inflation, was not able to cut the rates in February 2020. 

The Government has started to consider the supply side solutions to this problem of Stagflation and definitely there are chances to tackle this problem by encouraging manufacturers and service providers to increase their productivity and quantum of the services delivered.

Where to focus for improving the value of currency?

Let’s focus upon the fall in the value of rupee, why it is depreciated after the independence of the India? More the expenditure upon developmental or non-developmental functions of government, directly or indirectly depreciated the value of rupee. The productive work of entrepreneurs leading to more collection of taxes, increase in employment, reduction of poverty etc; also appreciated the value of rupee. Developed nations are more progressive because the citizens of nations are more comfortable to generate the employment opportunities and are working to perform better with their strategies without being worry to pay the taxes. While in developing nations, the rates of taxes are too high that the business men instead of putting their efforts to earn more, put more efforts to evade taxes with the help of Chartered Accountants (CAs). 

In September 2019, the GDP dropped to 6.3% which was lowest during the decade of 2010 to 2020. Thereafter, the Indian Economy witness the losses from Covid-19 impact and now in December 2020, the Kisan Movement further making the situation worst. 

In such circumstances, India is struggling to prepare for the war with the Pakistan and China to fight with terrorism. Obviously, the currency will further dropped and this time, India requires the support of economists to sit inside the NITI Aayog and frame a chart to boost the economic growth.
Continued.... <<Restricting Demand of Products and Services to contain Inflation is good or bad?>>

*Copyright © 2018 Dr. Lalit Kumar. All rights reserved. 
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