Changes in industrial policy and their effects on industrial growth upsc vision ias
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Introduction
One of the most important tasks of the government is to manage economy of the country. It has to decide the means and methods to be used towards this. However, this job was taken up by almost all countries only after great depression. In pre depression era, there was faith in laissez Faire model of economy, which literally means – no intervention and let market forces of demand and supply have free hand. This is also known as capitalist mode of economy, where goods and services to be produced are decided by purchasing power of the people. In this model need of people is not deliberately considered, but it is believed that free markets will automatically take care of everyone’s need. If there are any mismatches in demand and supply, then price of the products will fluctuate in order to rope in or out suppliers and consumers and consequently there will be demand supply equilibrium. This kept government intervention away till the end of great depression of 1920’s.
Great depression brought spiraling hyperinflation which rendered wide range of commodities unaffordable to the masses. With this accompanied massive unemployment. It belied excessive faith placed in free markets and it demonstrated that markets are not sacrosanct as there was a big market failure. Famous economist John Keynes made out compelling case for government intervention, through incurring fiscal deficit to create demand. It was clear that government will have to manage production patterns of economy and promote production of specific goods in interest of consumers and employment. Roosevelt’s New Deal in US made it quite clear that now US government will intervene for promoting key industries.
I hope it's helpful.......
One of the most important tasks of the government is to manage economy of the country. It has to decide the means and methods to be used towards this. However, this job was taken up by almost all countries only after great depression. In pre depression era, there was faith in laissez Faire model of economy, which literally means – no intervention and let market forces of demand and supply have free hand. This is also known as capitalist mode of economy, where goods and services to be produced are decided by purchasing power of the people. In this model need of people is not deliberately considered, but it is believed that free markets will automatically take care of everyone’s need. If there are any mismatches in demand and supply, then price of the products will fluctuate in order to rope in or out suppliers and consumers and consequently there will be demand supply equilibrium. This kept government intervention away till the end of great depression of 1920’s.
Great depression brought spiraling hyperinflation which rendered wide range of commodities unaffordable to the masses. With this accompanied massive unemployment. It belied excessive faith placed in free markets and it demonstrated that markets are not sacrosanct as there was a big market failure. Famous economist John Keynes made out compelling case for government intervention, through incurring fiscal deficit to create demand. It was clear that government will have to manage production patterns of economy and promote production of specific goods in interest of consumers and employment. Roosevelt’s New Deal in US made it quite clear that now US government will intervene for promoting key industries.
I hope it's helpful.......
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