Explain role of government in development of country
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The Role of Government in Economic Development.... 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.
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1. Direct Role:
The government is a social-welfare organisation. It works for the benefits of the common people without making any motive to maximise profit.
Hence, the main agenda of the government is welfare maximisation.
The direct involvement of the government towards the country’s development is summarised below:
(a) Agricultural Growth:
India is an agro-based country. The main occupation of the Indians is agriculture and its allied activities like farming, poultry, cattle rearing, fishing, animal husbandry etc. According to recent statistics, about 67 per cent of the labour force in India is engaged in agriculture. They are producing about 22 per cent of the country’s GDP (Gross Domestic Product).
However, due to defective planning and improper implementation the productivity of Indian agriculture is very poor. Improper land tenure system, wrong landholding inadequate credit system, primitive technology and old system of ploughing and irrigation etc. are the main reasons behind low productivity of Indian agriculture. To overcome all these difficulties, government adopts several measures, including land reforms, new tenancy system, economic subsidy etc. for the growth of per hectare agricultural production.
(b) Industrial Growth:
In the Second Five Year plan the Government of India had given huge emphasis on the development of basic and heavy industries like steel, iron, cement, power etc. Although consumer goods industries are growing up properly, but the capital goods industries have lost their momentum. Most of the industries have become sick and weak. To save these situations, in 1991 the Government of India adopted New Industrial Policy.
By the policy of privatisation, the government gives enough licence to the private sectors for developing consumer goods industries along with few heavy engineering goods. However, the core basic industries like defence, railway, power and energy etc. are still under the government hand. Proper credit facilities and adequate subsidies are also provided to the industrialists to increase their scale of production.
(c) Development of Socio-Economic Infrastructures:
In order to maintain a smooth functioning between agriculture and industrial sectors, a sound socio-economic infrastructure is necessary. Thus, government is investing huge amount money of for the development of overhead capitals like energy, power, transport, communications, education, health, housing etc. Moreover, the government is also giving stress on the development of other tertiary sectors like banking finance, insurance etc.
(d) Efficient Utilisation of Resources:
All the countries have different types of natural and economic resources for their own use. These resources are used optimally to satisfy maximum wants among the economy. This will enable the country to achieve the path of economic development. Hence, efficient utilisation of domestic resources is the main role of the government.
(e) Maintain Law and Order:
The government or the state plays an important role in maintaining peace law and order within the economy through effective administrative system. The state runs defence, police and court to maintain peace and order both externally and internally.
(f) Social Distributive Justice:
To implement social distributive justice, i.e., to reduce inequalities between rich and poor, the government plays a vital role in an economy. The government takes several measures in this context, such as;
(i) Progressive Taxation:
Here rate of taxation increases along with the increase in income. For example, rich or high income earning people will give more taxes, while poor people will either pay low taxes or no taxes at all.
The government is a social-welfare organisation. It works for the benefits of the common people without making any motive to maximise profit.
Hence, the main agenda of the government is welfare maximisation.
The direct involvement of the government towards the country’s development is summarised below:
(a) Agricultural Growth:
India is an agro-based country. The main occupation of the Indians is agriculture and its allied activities like farming, poultry, cattle rearing, fishing, animal husbandry etc. According to recent statistics, about 67 per cent of the labour force in India is engaged in agriculture. They are producing about 22 per cent of the country’s GDP (Gross Domestic Product).
However, due to defective planning and improper implementation the productivity of Indian agriculture is very poor. Improper land tenure system, wrong landholding inadequate credit system, primitive technology and old system of ploughing and irrigation etc. are the main reasons behind low productivity of Indian agriculture. To overcome all these difficulties, government adopts several measures, including land reforms, new tenancy system, economic subsidy etc. for the growth of per hectare agricultural production.
(b) Industrial Growth:
In the Second Five Year plan the Government of India had given huge emphasis on the development of basic and heavy industries like steel, iron, cement, power etc. Although consumer goods industries are growing up properly, but the capital goods industries have lost their momentum. Most of the industries have become sick and weak. To save these situations, in 1991 the Government of India adopted New Industrial Policy.
By the policy of privatisation, the government gives enough licence to the private sectors for developing consumer goods industries along with few heavy engineering goods. However, the core basic industries like defence, railway, power and energy etc. are still under the government hand. Proper credit facilities and adequate subsidies are also provided to the industrialists to increase their scale of production.
(c) Development of Socio-Economic Infrastructures:
In order to maintain a smooth functioning between agriculture and industrial sectors, a sound socio-economic infrastructure is necessary. Thus, government is investing huge amount money of for the development of overhead capitals like energy, power, transport, communications, education, health, housing etc. Moreover, the government is also giving stress on the development of other tertiary sectors like banking finance, insurance etc.
(d) Efficient Utilisation of Resources:
All the countries have different types of natural and economic resources for their own use. These resources are used optimally to satisfy maximum wants among the economy. This will enable the country to achieve the path of economic development. Hence, efficient utilisation of domestic resources is the main role of the government.
(e) Maintain Law and Order:
The government or the state plays an important role in maintaining peace law and order within the economy through effective administrative system. The state runs defence, police and court to maintain peace and order both externally and internally.
(f) Social Distributive Justice:
To implement social distributive justice, i.e., to reduce inequalities between rich and poor, the government plays a vital role in an economy. The government takes several measures in this context, such as;
(i) Progressive Taxation:
Here rate of taxation increases along with the increase in income. For example, rich or high income earning people will give more taxes, while poor people will either pay low taxes or no taxes at all.
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