What is your stand of Government Investment on Firms/ Projects in the bid to contribute to the nation's GDP?

Question

We all know that Investments in a nation contributes to its GDP.. GDP is supposedly a reflection of our economic condition/health..

As the government steps in to invest & while making profits do you think they are distorting actual condition of economic growth or trying to improve GDP figures in a not so appropriate method? The saying is.. 'since we can't get people to do the job/invest, we do it ourselves' I mean.. since either way it will contributes to the nation's growth.

Without looking at actual situation, I'm already assuming that government might be involved in cashing into firms, do you think it is a good measure to improve economic condition as firms receive investment funds from government & the goverment can generate reserves on such investments?

Is it ' Dual Beneficial' or is it just a distortion of facts.

What's your stand?

Answer 1

You do not say which country you are in. In the US, the government cannot legally invest in businesses. As a practical matter, a government could not invest in business. Consider the politics. The "in crowd" would get the investment money, not necessarily the best businesses. Taxpayers would be livid; the government taking taxes that are not "needed" would not be acceptable. Finally, it would be opening the door for waste, fraud and corruption. We already have too much of that in Medicare, Medicaid, the defense industry and every other government department that spends money.

Answer 2

Commecially and economically viable projects contribute to GDP growth. So investments in them are desiable from the point of view of economic growth. Unfortunately, when Govt. invests in the projects or help private entrepreneurs to set up projects by giving investment subsidy, in most cases wrong or inefficient projects are chosen and implemented. In fact. if the govt. invests or involved in industrial/ infrastructural projects, not only is the probability that less efficient/ less desirable projects will be chosen s significantly higher, the implementation of projects are likely to witness much longer delays and higher extra costs and investments. Also, projects that should be abandoned mid-way in favour of better projects so that waste of investmentr resources is minimized, will not be abandoned by Govts. and firms and projects that are not viable and a burden on the economy will be kept alive by govts by fresh investments that will cause negative impact on the GDP growth. So, if govts are kept away from investments in projects and firms, the better it is for GDP growth.
Govts. generally do not want to recognize failures, play cautiously thinking that they can avoid rsk but actually create more risk, do not know how efficiently to incentivise project implementation and exercise controls and nepotism/ corruption leads to wastes.