Role of the Government in any country


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Role of the Government in any country

 

Government in any country normally plays four important roles in an economy, i.e. regulation, promotion, entrepreneurship, and planning.

 

ØRegulatory Role: Government regulation of the business may cover a broad range extending from entry into business to the final results of a business.  The reservation of industries to small scale, public sector, private sector etc regulates the entry.

 

Government regulation about the economy may be further divided into direct controls and indirect controls.

 

Direct Controls: the direct administrative controls are more drastic in their effect. They can be applied selectively from firm to firm and industry to industry at the discretion of the state.

 

Indirect Control: It is usually exercised through various fiscal and monetary incentives and penalties. Certain activities may be encouraged or discouraged through monetary incentives and disincentives. For instance, a high import duty may discourage imports and fiscal and monetary incentives may encourage the development of export oriented industries.

 

Here, it must be noted, that in India, regulation of business had been extensive. Since the beginning of 1990 a deregulation trend has set in, this has drastically transformed the competitive environment and has given an impetus to globalization.

 

ØPromotional Role: The promotional role played by the government is very important in developed countries like India. In our country, where the infrastructural facilities for development are inadequate and entrepreneurial activities are scarce, the promotional role of the government assumes special significance. The State assumes direct responsibility to build up and strengthen the necessary development infrastructures, such as power, transport, finance, marketing and other promotional activities.

 

ØEntrepreneurial Role: The state also plays the role of an entrepreneur – establishing and operating business enterprises and bearing the risk. Dearth of private sectors, neglect of certain sectors, like unprofitable sectors, absence of competition in certain segments and the resultant exploitation of consumers, industries like steel, petrochemicals and fertilizers requiring capital-intensive projects for which investment requirements are very high have contributed to the growth of state owned enterprises in many states.

 

ØPlanning role: State also plays a very important role as a planner. If the resources are abundant it will not matter how they are used. They will go in common pool of development. but where one’s resources are limited like our country’s it is important to see that they are directed to the right purpose so a to help to build up whatever one is aiming it.


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