Lecture 5

Political and Govt. environment.. Functions of the state:

Addressing market failure
Minimal function

Improving equity

Providing pure public goods Protecting the poor Defence Antipoverty programmes Law and order Disaster relief Property rights Macroeconomic management Public health Addressing Regulating externalities monopoly Basic education Environmenta l Protection Overcoming imperfect information Insurance (health, life, pensions), consumer protection Providing social insurance, family allowance, unemployme nt insurance

Intermediate Function

Activist Function

Coordinating private activity Fostering markets Cluster initiatives

Redistribution Asset redistribution

Economic roles of Govt..

Regulatory role Promotional role Entrepreneurial role Planning role.

Economic roles of Govt. in India..

1) Providing legal and social framework. 2) Maintaining competition 3) Redistribution of income 5) Stabilizing the economy-inflation, unemployment etc.

Govt. and legal environment..

Standards of the product including its packaging. Advertisement Dilution of monopoly power. Industrial policy, fiscal policy, tariff policy

The government comprises three branches: the executive, the legislative and the judiciary.

The executive branch headed by the President, who is the Head of State and exercises his or her power directly or through officers subordinate to him. The Legislative branch or the Parliament consists of the lower house, the Lok Sabha, and the upper house, the Rajya Sabha, as well as the president. The Judicial branch has the Supreme Court at its apex, 21 High Courts, and numerous civil, criminal and family courts at the district level.

Constitutional environment..
The Constitution guarantees a number of economic rights to citizens but at the same time the state has the power to impose reasonable restrictions on such rights in public interest. 1) Fundamental rights E.g Right to equality Right to freedom to practice to any profession. Right against any exploitation.

2) Fundamental duties..
To abide by the constitution To defend the country Render national service when called upon to do so To promote harmony and spirit of common brotherhood. To cherish and follow noble ideals which inspired our national struggle for freedom.

3)The directive principles..

The State shall strive to promote the welfare of the people. Minimize the inequalities in income, status, facilities and opportunities. The ownership and control of the material resources of the community are so distributed as best to serve the common goal. Equal pay for equal work for both men and women. Make effective provision for securing the right to work, to education and to public assistance in case of unemployment.

 4) Freedom of trade, commerce. 5) Separation of power- Govt function must be based on a tripartite division of legislature, executive and judiciary. Each organ should be distinct, separate and sovereign in its own allocated sphere. 6) Division o power-Indian constitution distributes the items for legislations among three lists-union list, state list, concurrent list.

Constitution

Judiciary

Executive

Legislature

Central List Central Govt

Concurrent list

State list State Govt Local Govt.

Budget

Direct Involvement in business

Policies Guidelines Codes Laws

Development/promotional Organizations e.g Development banks, Export development authorities

Regulatory Organizations e.g TRAI, SEBI