Relationship between Business and Government

Today, we are going to discuss Business and government relationships. It is the subtitles of the Political environment. Let’s start with some basics about business and Government.

Business and Government Relationship

relationship between Government and Business image
Business and Government Relationship

Government and business institutions in a country in many ways are interrelated and interdependent on each other. In today’s global economy, businessmen and entrepreneurs are the driving forces of the economy. In the planned economy or even in the market economy government holds control of shaping the business activities of a country.

For maintaining a steady and upward economic growth. The Government must try to make the environment for business organizations suitable. And the organizations must follow the laws of governments’ to run the businesses smoothly and make sure there is a level playing field.

The main goal of businesses is to make a profit and governments’ goal is to ensure economic stability and growth. Both of them are different but very co-dependent. For this, the government and organizations or businesses always try to influence and persuade each other in many ways for various matters. A balanced relationship between the government and businesses is required for the welfare of the economy and the nation. Furthermore‚ the relationship between government and business can be explained by the following points.

Role of government towards business sectors/Government relation with business

The role of the government towards business can be viewed in three categories:

  • As a business promoter
  • As a business regulator
  • As a business caretaker


Government promotes business in the following ways:

  • Infrastructure and manpower development: Government provides the facilities like transportation‚ information technology‚ communication, water supplies‚ waste disposal‚ civic amenities facilities‚, etc. Besides‚ the government also conducts different educational and training programs for the development of technical and professional manpower in the nation. These activities facilitate business development.
  • Public enterprise: The government establishes different trading and manufacturing organization to deal with essential goods and services. They play an entrepreneurial role in setting up industries.
  • Source of information: Since‚ the government is the largest organization in a country‚ it has abundant information that can be used in business. Thus‚ the government acts as a source of information and provides to the business.
  • Financial Assistance: The government provides low-cost finance through its financial institutions like Nepal Rasta Bank‚ Provident fund‚ Citizen Investment fund‚ Agriculture development bank, etc. for industries.
  • Incentives and subsidies: The government facilitates business by providing subsidies to the growing and sick industries. It also provides incentives to the business producing essential goods and services to maintain low cost to the people


As a regulator government formulates different rules and regulations to operate the business smoothly. Businesses much comply with such regulations. The different business-related regulations are Private Firm, Registration Act‚ Trade union Act‚ Company Act‚ Labour Act‚ Food Act‚ Foreign Exchange Regulation, etc. Besides, ‚there are different policies such as Monetary  Policies‚ Fiscal Policies ‚ Trade policies ‚ Industrial policies, Solicitors Marketing, etc government enacted for the development of business.


As a caretaker government provides protection from political risk factors such as extortion‚ band‚ unrest etc. Apart from that‚ it formulates and implements strict rules and regulations to protect intellectual property rights.

Role of business towards the government/ Business relation with government

Business plays a vital role to support the government. They are as follows:

  • Payment of taxes: Taxes are the major revenue for the government. Business organizations pay various taxes to national and local governments. Besides‚ businesses also assist the government in the collection of taxes by deducing tax at source on salary and other payments.
  • Rendering of advice: Business organizations work side by side with the government to help in the formulation of different effective business plans and policies to develop sound economic conditions of the nation.
  • Source of information: Business organization provides valuable information regarding the current business trend and problems‚ which is helpful in better decision making by the government
  • Execution of contracts: Businesses help the government to execute its different developmental projects and programs. It also renders supplies and materials for the better functioning of the government.

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