Economics(Paper-4) - Shivaji University

1) Rise in employment : Industrial growth is pre-requisite for economic
development. The economic development of Germany, France, England, Japan have
been realized due to industrialization in rampant way. Its growth have been “trickle
down” to other sectors in the economy and led to rise in employment output and income.
2) To increase productivity of Farm : There is over crowding on the land. Thus
a country must begin with industrial development to supply fertilizers, farm machinery
and other inputs to raise the productivity of land. As a result, economic development is
possible.
3) Control over prices : Industrialization can control the fluctuations of prices of
primary products and deterioration in the terms of trade. Thus due to industrialization
sustainable development in an economy.
4) Modernization : People of urban as well as rural area may enjoy fruits of
modernization in the form of variety of goods and services availability due to
industrialization. Thus economic development can be achieved.
5) Social transformation : Most of the developing countries faces the problems
of social inequality lack of social transformation due to agriculture base of the economy.
With the introduction industrial atmosphere charges the out look of people which breaks
the social inequality.Thus it may play a greater role in the field of economic development
through more equitable distribution of income and balanced regional development.
3.2.3 Role of Monetary and Fiscal Policy in Economic Development :
A) Introduction :
Now a days monetary and fiscal policies are important tools to overhaul the basic
problems in developing economies. We will verify one after another.
B) Role of Monetary Policy in Economic Development :
Monetary policy refers to the policy of the monetary authority (Central Bank) of a
country with regard to money matters. This policy deals with control on supply of money
with changes in rate of interest. Sometimes monetary policy is also called as credit
policy of a country.The monetary policy cannot be one and same for both developed
and developing country.A developed country can use monetary policy to achieve variety
of objectives such as full employment, price stabilization or exchange rate stabilization
as per the requirement of economic situation. But in a developing economy the prime
objective is to achieve economic growth or development. Thus, the following points
highlights the role of monetary policy in economic development of a country.
1) Spread of Financial Institution : It is responsibility of the monetary authority in
a economy to extend banking facilities in those areas in the country which are either
unbanked or under banked. In addition to this, monetary authority should ensure that
the flow of finance to the priority sector must be accordance to the development plan of
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