By G. Ram Reddy, V. V. Ramanadham
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Additional info for Government and Public Enterprise: Essays in Honour of Professor V.V. Ramanadham
Example text
While the countercyclical role of enterprises continues through the takeover of sick units or selective expansion of capacity, they have also been used since the early 1970s for reducing the rate of inflation through price restraint. 2 More recent experience, however, indicates that this measure did not have the desired effect and that, on occasion, it exacerbated the inflationary pressures through increased government budget deficits and that the fine tuning of demand management was not altogether successful.
Such a review is not, however, undertaken in any country. In India, an effort is made to review them when further expansions are proposed to the enterprise activities. In several countries, annual additional outlays are proposed for the enterprises in a routine manner and in the absence of a review of the previous experience, they strain the financial management capabilities of enterprises further. Moreover, factors of x-efficiency,15 such as organisational slack manifested in different ways, also fail to receive attention.
9, HMSO, London, 1976. 3 Public enterprises are distinguished from others mainly in terms of the financial significance inherent in their permanent relationship with government. The permanent relationship has two important aspects that merit recognition. 4 Although this is not universally correct, it has contributed to the perception that the financial problems of the enterprises become, in due course, the problems of the government budget contributing to higher deficits and increased domestic and foreign borrowing.
