MACRO PRACTISE AND POLICY PRACTISE
The government can intervene in order for this issue to be resolved, every year the government introduces "Government Budget" which decides how much amount of money has to be spent on different sectors of the economy.
The government frames its budgetary policiss with a view to achieve a number of objectives.
Through the revenue and expenditure policy, government strives to achieve a high rate of GDP growth. It makes investment expenditure on infrastructure including damns, roads, bridges and other related projects. Investment friendly environment is generated in the economy. High the investment, high the GDP growth.
While alloacting funds for infrastructural development, focus is placed on the development of backward regions in the country. In india, there is an establishment of SEZ (special economic zones) which is an important step towards the development of backward regions. Tax laws are more liberal in SEZ compared to other parts of thr domestic economy. Liberal tax laws along with infrastructural development make SEZ an attractive destination for investment. This contributes to balanced regional growth.
In market economies, allocation of resources is determined by the forces of demand and supply. High taxes are levied on the production of luxury goods while subsidies are offered for the production of necessities of life.
The government also distributes income and wealth. The goverment offers tax exemptions to poorer sections of the society. On the expenditure side, the government offers free education and health care to those living below the poverty line. Also subsidised supplies of foodgrains are offered to economically weaker sections of the society.
Investment in public enterprises and the provision of administrative services generates employment opportunities. Programmes are launched by the government in rural areas, they provide minimum guaranteed employment to the people in rural areas.
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