Economic Role of Govt - Copy

7/30/2019 Economic Role of Govt - Copy

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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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Documents

Economic Role of Govt - Copy