- Meaning and Definition
- Instruments of Economics Policy
Economics planning is an important process of development in a developing economy.After the Second World War,most of the developing countries of the world have adopted the path of economics planning to solve their economic problems such as unemployment, industrialization, poverty, population explosion and economic inequality. Due to ignorance, illiteracy, superstition, bigotry and social customs, there was a lot of opposition to economic planning in the beginning.
In developing countries, many economic programs have been adopted to solve the problems of unemployment, poverty, low standard of living, low productivity, low income, economic inequality etc., which have also yielded favorable results. Economic policies are formulated for various programs and they are also implemented effectively. The main goal of economic polices is to improve the standard of living of the countrymen by making maximum use of the natural and human resources existing in the country.
Before the meaning and definition of economic policy, it is necessary to know the definition and meaning of “policy”. Policy refers to an action plan that is proposed by the government and businessman decide such a policy so that the predetermined objectives can be achieved. In other words, policy is the general statement through which the members of an organization are given guidance to perform their duties and other activities.
Economic policy the government policy through which the economic activities of the country are regulated. This is a well thought out policy by the government. Through this, the management,regulation and contro of the economy is easy and economic objectives are fulfilled. Economic policy is directly related to the economic activities of the country but it also has social, cultural, political and religious aspects.Economic policy is adopted to run the country’s economy smoothly. Every economy has its own objectives. To fulfill these objectives, economic policy is formulated.
According to Koontz and O’Donnell,“Policies are general statements or understandings that guide the thought element and action of decision-making.”
Prof. J. Ale. Henson has mentioned some of the major objectives of economic policy which are also contradictory to each other. These are as follows:
- Achieving full employment status.
- To achieve high rate of economic development so as to raise the standard of living of the economic.
- To increase economic welfare through redistribution of wealth.
- To achieve stability in the value of the monetary unit.
Economic policy is closely related to social policy, which also includes social security and improving the living conditions of the people. Economic policy encourages the economic activities of the economy in a favorable direction.It helps in achieving the given economic objectives by regulating and controlling adverse economic activities.
Economic policies are also affected by social and political environment. If our aim is to maintain social security, improvement in standard of living,political stability and law and order, then economic policy should not be contrary to these objectives.|
Policies have the following characteristics:-
- Policies are helpful and guide in continuous decision making.
- Policies are not limited to the decision making power of the managers or administrators but also determine the boundaries of the decisions.
- Policies differ from objectives. Objectives are concerned with the circumstances to which they are to be reached, whereas policies are the means or methods by which the objectives are reached. Objectives serve to achieve the goals and objectives of the plan.
- Policies are not rules. Policies act as a guide in decision making. Policies act as guides for making. decisions based on ideas. Executive officers take decisions according to the circumstances but they take guidance from the policies laid down earlier. So they have to work according to the rules.
Economic policy has many objectives. Some of them are complementary and some are contradictory. The selection of these objectives is done keeping in view the long-term outlook and current needs.
An economic policy in a developing country like India has the following objectives:-
- Creation of employment opportunities- Creating employment opportunities in developing countries is one of the main objectives of economic policy so that human resources can be fully utilized in economic development. The main objective of economic policy is to maintain the status of full employment in developed countries. The problem of unemployment arises in these countries due to overproduction, over-capitalization, structural changes and technological advancement etc. Therefore,according to the economic policy, employment policy is formulated in these economies.
- Rapid economic growth- The aim of economic policy in developing countries is to achieve rapid economic growth. Rapid and balanced economic development is possible development is possible through economic policy. Economic development is a continuous process. With the formulation and effective implementation of proper economic policy, optimum utilization of the country’s resources and proper directions can be given to the economy.
- Economic Stability- The objective of economic policy is to achieve a condition of economic stability in the country by regulating and controlling the fluctuations in prices. Through economic policy, coordination has to be established between production, consumption, distribution and demand so that economic fluctuations can be minimized.
- Maximizing Social Welfare- The objective of economic policy is to maximize social welfare in the country. The government adopts such economic policies so that the resources are used to maximize social welfare. Income and wealth are distributed in favor of the poor class. Progressive taxation leads to distribution of wealth in favor of the poor and social welfare increase.
- Economic equality and justice- The aim of economic policy is not only economic development but also equitable distribution of the benefits of development. This will increase the equality of income, wealth and opportunities society. The poor section of the society will be able to get social and political justice, equal opportunities of employment, equal pay for equal work and payment of minimum wages, economic policy is determined to convert descriptive and allocate skills into productivity efficiency. important objective.
- Economic Freedom- Economic freedom means freedom of work. Any person has the freedom to choose the occupation through which the economic and social interests of the people can be fulfilled. The government will provide proper facilities to every person to do business. Freedom of subsistence for every individual is the basic basic of economic policy.
- Increase in production- The objective of economic policy is to increase the production in the country. Producers should be given a fair price for their produce so that there can be an incentive to increase production. The determination of industrial policy and agricultural policy should be such that production is large and supply of consumer goods is easy. Foreign trade policy should encourage exports and replace imports. Thus, the objective of economic policy is to increase production and income. Uninterrupted progress in the generation of income is the basic mantra of economic policy.
- Planned economic development- The basic objective of adopting economic planning in developing countries is to provide opportunities for equitable development. The aim of economic policy is to encourage planned economic development so that along with the general objectives, the objective of balanced development can also be fulfilled.
- Growth in exports- In developing countries, the balance of payments is adversely affected and there is limited availability of foreign exchange instruments. In such a situation, economic policy is adopted to increase exports and fulfill the purpose of import substitution. The adverse balance of payments in the country can be removed by promoting exports in latest products and sectors at competitive prices. There are many countries in the world whose main basic of economic policy is export.
- Coordination between public and private sector – Mixed economy has been adopted in India. In this, the public and private sectors are developed simultaneously. They complement each other rather than compete with each other. Initially, emphasis was laid on the expansion of the public sector and along with the establishment of many enterprises, the private sector undertakings were nationalized. Under the economic reforms, important steps are being taken for privatization and non-investment of public undertaking. The government has adopted the policy of liberalization, privatization and globalization as a result of which-Many changes have been made in economic policies so that coordination between public and private sector can be established. The aspect of public-private partnership is very important in the current economic policy.
Differences are found in the economic conditions of developing and developed countries, because their economic problems are also different. The economic problems of a developing country are different from those of other developing countries. The economic problems of developing countries are more complex than those of developed countries. Every country has to formulate appropriate economic policies to solve its economic problems. In order to implement these economic policies effectively, proper tools have to be taken in it. If economic policies are implemented through them by adopting appropriate tools, then these objectives can be achieved relative and easily. The following instruments of economic policy are used.
- Monetary Instruments- The quantity and cost of money and credit are affected through monetary instruments. Through monetary instruments, the economic fluctuations in the economy are directed in the right direction so that the supply of can be regulated and controlled. Monetary instruments are used through the central bank so that specific economic objectives can be met. For example- stability of exchange rate, control of the amount of money and credit, price stability, full employment, banking, development, capital formation and promotion of investment etc. objectives are fulfilled. To achieve these objectives quantitative and qualitative methods of credit control are adopted.
- Fiscal instruments- Public income, public expenditure, public debt and deficit economy are the major fiscal instruments. The government prepares and implements many economic and social programs. The government receives income from various sources and spends it on various items. Public debt and deficit instruments are adopted to bridge the gap between government expenditure and income adopts the economy. These fiscal instruments are adopted to meet various economic objectives.
- Commercial Equipment- Domestic and foreign trade important changes in the volume, direction and composition of trade in the economic policy of the country in the last decades have changed places., The objectives of economic policy are fulfilled through commercial instruments. free and restricted trade in these commercial instruments. There are priorities according to interests, priorities according to goods, etc. They are used for the fulfillment of economic purpose.
- Economic Controls- Economic controls are chosen to guide economic activities in certain directions. Consumption, production, exchange, distribution and revenue control etc. impose restrictions on individual liberty. Sometimes such controls are necessary for the success of economic policy. Each sector of the economy is related to each other and influences each other. For the success of the controls, it is very important to have a definite thinking, policy and regulation system, in these controls price control, control over investment, license policy, public distribution system, etc. are prominent.
- Grants – The government gives grants so that the cost of the goods produced decreases. And its price is kept down. It is a payment made to producers or distributors to keep prices low. The grants given in various sectors include agriculture sector, export, consumer etc. sectors in which grants are given so that the objectives of economic policy can be fulfilled. The main objective of the grants is to ensure public welfare by making those goods available at reasonable prices to the classes which cannot buy the goods of public utility at high prices. For example education, health, public distribution system, electricity, water supply etc.
- Institutional Change – Institutional change is necessary for the fulfillment of the objectives of economic policy. In order to check the monopolistic tendencies in the country, the government has implemented monopolistic restrictions, trade and behavior control system in various forms. The desired institutional changes are necessary for establishment of enterprises, nationalization and disinvestment policy, liberalization, globalization etc. in the public sector. With this, the objectives of economic policy can be easily achieved.