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L 10 economic role of government in business and state

The document discusses the economic role of the government in business and state intervention in business. It outlines the various aspects that affect government policy toward business, including political ideology and stability. It then describes the government's role in enacting and enforcing laws, maintaining infrastructure, providing money and credit, transferring technology, assisting small businesses, and more. The economic roles of the government are regulatory, promotional, entrepreneurial, and planning. While the government initially reserved many industries for public sectors and imposed strict controls, economic reforms since 1991 have led to liberalization, privatization, and a reduced regulatory role.

Education◦
ECONOMIC ROLE OF GOVERNMENT IN BUSINESS AND STATE INTERVENTION IN BUSINESS
• Aspects Of Government affecting the business: 1. Political ideology of government 2. Political stability in the country 3. Relation of Government with other countries 4. Defense and Military policy 5. Welfare activities of government 6. Centre state relationship 7. Approach of opposition parties towards business
Role of Government Towards Business 1. Enacting and Enforcing laws: framing laws, policies and implementing them 2. Maintenance of Law and Order 3. Provision Of Infrastructure: like power, transport, warehouses, water supply and other civic amenities etc. 4. provision of Money and credit: It includes Banking, capital and money market.
5. Transfer of Technology: Rand D centers set up by government makes available technology to private entrepreneurs. 6. Licensing and Inspection 7. Assistance to Micro and Small Enterprises: like concessional loans, marketing support, infrastructural support, technological support, subsidies etc. 8. Protection from foreign Competition 9. Marketing support: by arranging trade fairs and exhibitions etc. which provide platform to domestic business units to display their product. 10. Support to backward regions 11. Provision of Information: government agencies collect and publish informations like census report, information about latest R and D ,RBI bulletin etc.
Economic role of Government • Regulatory Role:  Direct Control: licensing, reservation of certain products for small enterprises, reservation of industries for public enterprises ,restrictions on Import export etc.  Indirect Control: not selective in nature eg: regulation of promotional activities, restrictions on inter corporate investments limit on managerial remuneration etc. also monetary policy measures, measures to check concentration of power etc.
• Promotional Role: It includes: 1. Development of- transport and communication facilities Social overhead capital Money and credit system like banks, stock exchange etc. 2. Generation and distribution of Power and energy 3. Providing incentives in form of tax concessions, subsidies etc.
• Entrepreneurial or participative role: Setting up of public enterprises like railways, power generation plans, steel plants ,heavy machinery etc. • Planning role: government frames economic plans to ensure optimum utilisation of resources.
Changing Role of Government • All the roles of Government are changing influenced by economic conditions, economic policies, economic systems, global environment etc. • Initially in post independence period government reserved many industries for public sector ,made strict rules to regulate private sector, strict licensing policy, strict Tariffs etc..
• But after 1991,in post reform period, government adopted LPG: Liberlisation, Privitisation and globalisation Foreign enterprises are promoted to set up business units in India Strict FERM ( Foreign Exchange Regulation Act) has been replaced by FEMA(foreign exchange Management Act)
Changes in Government role are: • 1 Regulatory role: relaxations in licenses, quotas, permits etc.. • 2. Promotional Role: govt. is spending more on infrastructure • 3. Participative role: 17 reserved industries • For public sector reduced to 3. • 4. Planning Role: It has not changed much.
State Intervention in Business • Objectives: 1.Must for planned economy 2. constitutional binding 3. To lay strong base for development 4. To generate Revenue 5. To correct failure of Market Mechanism 6. To promote balanced regional development
• 7. To safeguard security of the Nations • 8. To ensure Fair distribution of Essential goods