economic role of govt - copy
TRANSCRIPT
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ECONOMIC ROLE OF GOVERMENT
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GOVERMENT
The term government is derived from the Latin
word gubernare that simply means to manage
or to govern.
Government simply a governing body of particularstate.
Development of a nation entirely depend upon the
policies accepted and practiced by the governmentof particular country.
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Economic role of government
Government plays five important economic role.
1. Regulative role
2. Promotional role
3. Entrepreneurial role
4. Planning role
5. Preventive role
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Regulative role
In this role , government regulates the economic
activities by direct and indirect control.
1. Direct control
direct control can be applied from firm to firm,
industry to industry like reservation of certain
products for small enterprises, licensing, imposing
restrictions on imports
and exports etc.
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2. Indirect controlThese are applicable to all types of business
units. For example..
(a) Restrictions on inter-corporate investments.
(b) Interlocking of directors.
(c) Regulation of promotional activities.
(d) Tax measures.
(e) Monetary policy measures.
(f) Measures to regulate foreign investments.
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Promotional role
The promotional role of government is veryimportant for the economic development of the
nation. For promoting economic development,
government provides infrastructure, socialoverhead capital etc.
Promotional role of government are as follows-
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1. Generation and distribution of power andenergy(electricity, coal, petroleum products, natural
gas etc.)
2.Development of transport and communication
facilities.
3. Development of social overhead capital like health,
education, training institute etc.
4. Development of money and credit system like
banks, stock exchanges etc.
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5. Providing incentives in the form of tax concessions,subsidies, concessional loans, etc. for development
of industries which are of strategic importance and
for industries located in backward regions.
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Entrepreneurial/participative role
In this role, government directly participates ineconomic activities by setting up public enterprises.
Indian government has setup various enterprises
likeRailways
power generation plants
steel plants
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Enterprises produces various engineering goodsheavy machinery etc.
In developing countries like India this role is
of special importance as all economic activitiescannot be left to the private sector due to many
different reasons. Some of them are as follows-
1.To promote social welfare by providing essentialitems at a price even below cost of production.
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2. To promote areas where private sector has no
interest, because these areas are less profitable and
required huge capital.
3. To protect consumers from the monopoly like
situation created by private sector.
4. To takeover sick private sector units in the interest
of employees.
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Planning role
For planned economic development of the nation,government frames economic plans to ensure
optimum utilization of resources.
In economic planning, priorities are setup, in whichmore important areas are given top priority.
In India government has setup planning commission ,
which frames five year plan for promoting economicdevelopment and achieving social welfare
objectives.
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Preventive role
Government play preventive roles to save theeconomy from depressions and recessions. For
playing a preventive role governments put attention
on all those aspects that can initiate a chain
reaction of downfall. For this purpose government
keep a check on practice like market stipulation,
money laundering, increase money supply etc.
So no doubt an economy gets its shape from variousplayers, but its the government that provides it
with a backbone.
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conclusion
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