The Role of Government in Economic Development

The Role of Government in Economic Development

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  The Role OfGovernment In Economic Development
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  Introduction The ultimate goalof a government is to promote human welfare in the country. It works as an agent of economic development. Governments provide the legal and social framework, maintain the competition, provide public goods and services, national defence, income and social welfare, correct for externalities, and stabilize the economy. The government also provides polices that help support the functioning of markets and policies to correct situations when the market fails. As well as, guiding the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By applying the fiscal policy which adjusts spending and tax rates or monetary policy which manage the money supply and control the use of credit, it can slow down or speed up the economy's rate of growth in the process, affecting the level of prices and employment to increase or decrease.
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  Functions Of State i)Defensive Function This primary function of state includes defence from external aggression and maintenance of law and order, as these two are essential for economic devlpt. ii) Administrative Function Setting up of administrative structure and agencies for administering and controlling the different departments in the country. iii) To Provide Social Security Insurance against accident, assistance to poor, the sick and the unemployed. Promotion of natural and human resources by providing education, medical aid, housing, library, public parks, sports grounds, museums. iv) Economic Functions -Assess, Explore and make Optimum utilisation of natural resources -Ensure growth by maintaining economic stability -Reduce economic disparities by minimising the gap between rich and poor and providing socio economic justice - Increasing the economic growth by arranging necessary raw material, machinery and foreign assistance & making and executing economic plans acc.to these.
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  How the StateAccelerates Economic Growth? i)Ensuring Economic stability and full employment State intervention is a necessity in developed countries which have free market economy. In underdeveloped nations it is achieved by dealing with poverty and unemployment and attaining higher living standards. ii) Comprehensive Planning Investing through a comprehensive state economic planning, the circle of underdeveloped equilibrium can be broken and economic forces can be checked. iii) Control Over Market Forces Through it a high rate of investment and economic development can be achieved. The state interferes in the operation of economic forces within the system to check the structural disequilibria. iv) Provision of Social and Economic Overheads As there is no immediate return on capital the private enterprises don’t like to invest in basic services like railways, road transport, telecommunication, electricity, ports, harbours, bridges, schools, technical institutions, etc. Hence it the responsibility of state to invest in these social and economic overheads and promote the rapid economic development in the country.
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  v) Agricultural Development Itis the duty of the state to undertake programmes for land reforms, productivity movement, consolidation of holdings, electrification, minor irrigation programmes and frame such a national agricultural policy that may ensure the farmers fair prices for their crops in our own markets and abroad. It is must for state as in countries like India 68% people depend on agriculture and it contributes 37% to its national income. vi) Industrial Development The state is supposed to get its natural resources surveyed, frame out a proper policy for their exploitation and development and also set up industries so as to utilise them in the most profitable manner. Also make a national monetary and fiscal policy to regulate and control private as well as public enterprises and stimulate and direct them for industrialisation of the country. vii) The Entrepreneurial Functions The state has to undertake the functions of planning, programming and entrepreneurship in underdeveloped countries. Reduce indivisibilities and discontinuities in the economy, overcome diseconomies of scale, have an impact of values, and offset certain other forces that arise to depress the economic development of the country.
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  Thank You Presented By- Rima Doot