Roles Of State In An Economy


There can be three kinds of roles for the state in an economy viz. regulator, producer/ supplier of private goods and services and Producer/supplier of public goods and services.
  • Role of a state, ideologies, and models of the economy are interrelated but it is not rigid for instance, China is a market socialist country but ideologically a politically communist.
 

REGULATOR

  • By this, the state regulates both the production network as well as the distribution network by announcing policy guidelines rules and regulations punishing the offenders.
  • For example, financial market regulation by the Securities and Exchange Board of India (SEBI).
UPSC Prelims 2024 dynamic test series

PRODUCER OF PRIVATE GOODS AND SERVICES

  • The state earns profit as a private enterprise and produces all those goods and services which constitute part of the market and which will be distributed among the needy according to the principles of the market mechanism.
 

PRODUCER OF PUBLIC GOODS AND SERVICES

  • The state produces goods and services which look essential from the perspective of social justice and well-being for the people. For example- Education, healthcare, sanitation, drinking water, nutrition, caring for the differently-abled and old, etc. at subsidized rates.
 
Roles Of State In An Economy
 
 

COMBINATION OF A STATE HAVING DIFFERENT ROLES

  • The economy which selects both the roles of a producer of public and private goods for the state under monopoly is a state economic system. Ex- Erstwhile USSR.
  • The economy which selects both the roles of a producer of public and private goods for the private sector is called the capitalistic economic system. Here the state had almost no economic role but played a passive role as the regulator. Ex- Western Economies.
  • Mixed economies had at least kept one economic role fixed for the state i.e. supplying public goods to the needy people. Ex- India.
  • In some of the mixed economies, the state went on to take some of the roles of supplying private goods even by carrying a heavy burden of subsidies. Ex-India from 1947 to 1991.

Any suggestions or correction in this article - please click here ([email protected])

Related Posts: