The government in each country has certain roles to play towards macro economic development and in this direction the government is responsible in formulating various planning strategies.
The planning by any government involves the below mentioned four stages:
The fixation of the objectives or targets;
An identification of qualitative and quantitative instruments;
The determination of the quantitative values of the chosen instrument which are a function of the targets and constraints and
The formulation of the connection between the constraint set and the relationship that exists between the targets and instruments.
In order to have the plans implemented strictly the governments are formulating various yearly plans and various kinds of instruments are used by the government towards ensuring that the targets specified in the plans are achieved without fail.
The instruments used by the government can be considered in agriculture, industries and foreign trade.
Even though the objectives of planned and unplanned economy are found to differ from one another, the role of the instruments becomes two fold and in a planned economy, they will be used for the purpose of changing the private profitability to coincide with social profitability. Moreover, the development path can be shortened in a planned economy by adopting appropriate policy instruments.
While in certain countries in respect of agriculture, the private sector dominates agriculture; in other countries, the participation by public sector is found to be more. However, the planned targets of the government with respect of agriculture are sought in order to meet through the use of price and non price instruments. The main constraints operating within agriculture can be termed as institutional, economic and technological.
The main institutional constraints are inequitable distribution of owned land, tenancy and problems of access to market and non market inputs, services and outputs. Tenancy leads to inefficiencies in production and the skewed distribution of land is responsible in resulting in larger farmers dominating agrarian institutions like credit, marketing and input supply channels. In this process, they perpetuate their dominance through what is currently called as the interlocking of markets. The major instruments which are used for reducing inequality in the distribution of owned land have been land reforms with ceilings being put on land owned.
The inefficiencies associated with tenancy are tackled through a shift from crop sharing to fixed rent and/or crop plus cost sharing, abolition of intermediaries, protection against tenancy eviction and controls on the level of rents. The access related problems are alleviated through land reforms and many target group specific programs formulated by the government.
The technological constraint is mainly caused by a lack of adaptive research in biological, chemical and mechanical innovations which are critical in achieving high growth rates in agriculture. This results in a high risk element in introducing new technology in agriculture. Public investment in research, dissemination of new knowledge and training and visits are used in order to relax this constraint.
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