As he famously said you put gold in the hands of all

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Unformatted text preview: ority running the economy. As he famously said-You put gold in the hands of all, and it will turn into sand. But if you put sand in the hands of each, he/she shall turn it into gold. In other words, everybody’s baby is nobody’s baby. However, modern liberals have long recognised that the government is not completely dispensable. While the allocative capabilities and efficiency of government authorities is still being questioned, it has been accepted that the government and the private sector are two sides of the same coin, and a synergetic relationship between the two needs to exist for a modern economy to function smoothly. We need to be clear as to what responsibilities the government should undertake to act as a complement to the private sector. Apart from the traditional role of maintaining law and order, protecting the state, and delivering justice, a modern state also forays into sectors that are ignored by the private sector, or where there is a strong possibility of moral hazard or perverse incentives to exist. Since private enterprises are motivated primarily by profit, they may not venture into domains like rural healthcare, educational services for the poor, or projects requiring large-scale investment with long gestation periods and low profit margins. Moreover, perverse incentives may exist in certain sectors like tobacco manufacturing, defence production, etc. It is specifically in these sectors that public enterprises must exist, therefore plugging the holes created by the lack of private involvement. This is exactly what Nobel Laureate Amartya Sen said, when he talked of the private sector’s “omission” of certain key sectors, where public sector participation was indispensable. The India Story ‘In 1991, with India running out of hard currency, Manmohan Singh…decided that India had to open its economy. “Our Berlin Wall fell…and it was like unleashing a caged tiger… We went from quiet self-confidence to outrageous ambition in a decade” ‘[Taru...
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