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Friday, 20 May 2011

Role of modern State in the economic affairs and different forms of state intervention

Keeping in view the analysis of various economic systems it is argued by various economists that state should intervene directly or indirectly in all those economic and social activities where the community as a whole can benefit. Today there is a strong demand by the people that state should play active role in the social and economic affairs of the country. Following are the important functions which are modern state performs.

1. Utilization of Resources :-
It is the basic responsibility of the state to make full utilization of economic resources for the economic welfare of the people. The state should make proper allocation of resources.

2. Maintenance of Law and Order :-
The primary duty of the state is to provide safety and security of life and property to the citizen. If the life of the people is not safe then they can not work efficiently and peacefully. It should enforce law and order in the country. If society is not satisfied it can not lead to economic progress.

3. Case of Monopolies :-
Higher prices are charged by the monopolists in case of monopoly. In this exploitation the state may protect the consumer from the monopolists. Keeping in view the intrust of the public takes control of those businesses which are extremely useful for the people and runs them almost on a non profit basis.

4. Provision of Capital Formation :-
In a certain sector private inverter is not willing to do the investment due to inadequate return then the state must take steps to do the investment. For instance, public health, libraries and roads should be constructed by the state if private sector is not forthcoming.

5. Protection to Labour :-
Generally workers bargaining power is very poor as compared to the employers. The interest of the workers can not be safe guarded without the protection of the state.

6. Supply of Currency :-
Another important function of the modern state is that it should provide good currency supply and fix the weights and measures to provide the stability in the prices.

7. Income Distribution :-
It is also the duty of the state to keep an eye on the income distribution of the public. It should take suitable steps to reduce the inequality of income in the country.

8. Economic Planning :-
In order to speed up the rate of economic development, it formulates the development programs. It fixes the targets and priorities and the proceeds to complete them.

9. Protection to Domestic Industries :-
Modern state also protects the domestic industries from the foreign competition by imposing the various restrictions. The domestic industry is encouraged and production expends.

10. Encouragement of Private Investors :-
The state also provides various types of incentives like tax holiday and import of machinery without custom duty to the private businessman. It encourages the private investment in the country.

11. Provision of Employment :-
It is also the primary function of the modern state that it should create the employment opportunities in the country and adopt various economic policies to reduce the rate of unemployment in the country.

12. Provision of Defence :-
It is the basic duty of the state that it should protect the country from external invasion. There should be no fear of external aggression to the citizen. They must be satisfied that their state has full power to protect the country.

13. Provision of Security :-
For the economic development it is the basic requirement . If any country the state can not provide the security and peace to the people, working of economics machinery can not run smoothly. As the unrest takes place the rate of investment falls. The expenditure of the state on the peace and security is productive.

14. Direct Intervention in Social Activities :-
It is duty of the modern state that it should provide free education, free medical facility, pensions and funds to sick and unemployed persons. It directly involves itself in the social welfare programs by opening health clinics, parks and libraries.

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