The principal goal of economic policy in a developing country like India is to accelerate the process of economic development and thereby ensuring swift economic development. It is worth to mention here that the concept of economic development is distinct from the concept of economic growth as traditionally defined. The goals of economic development are listed below:
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Rapid Economic Growth: In a developing economy, the principal goal of economic policy is to ensure rapid economic growth. Growth, i.e. increased output of goods and services, helps to build up backward and forward linkages that are so essential to ensure trickle- down and other spread effects.
Full Employment: Linked to the growth objective is the goal of full employment, i.e., to find productive use for all available resources in the economy. The economic games from full employment are enormous. Full employment yields the individual security, which in turn, promotes progress, contributes to human dignity and weakens non-functional discrimination.
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Better Distribution of Income: Market mechanism left to it promotes inequalities in the distribution of income and wealth. Inequalities lead to misallocation and misutilisation of resources. This can lead to a serious breach of social welfare. Economic policy can be so designed as to achieve a somewhat better distribution of income and wealth.
Human Development and Decent Work: Human development as an indicator of improvement in the quality of life is considered an important objective of economic development. Several factors like education and illiteracy rate, life expectancy, the level of nutrition, consumption of energy per head etc. are involved in the measurement of such qualities.
With the growing concern of human development, decent work has emerged another goal of economic development. There are four dimensions of decent work: work and employment itself, rights at work, security, and representation and dialogue.
Stability of Prices and Rates of Foreign Exchange:
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Monetary instability adversely affects both the growth process and the welfare. Fluctuations in the rate of foreign exchange affect international trade and introduce an element of uncertainty into the economic life of the country. Economic policy is a powerful instrument to ensure stability.
Maintenance of Fair Competition: Competitive conditions are essential for welfare maximisation. These can be ensured by an effective antimonopoly policy.
Avoidance of Cyclical Fluctuations: An essential feature of free market economies is what we call business cycles or trade cycles. These refer to regular cyclical fluctuations in economic activity with attendant consequences. An important goal before economic policy is to rid the economy of these ups- and-downs.