It is evident that the Government and the Buddhists have reached a political understanding. For example, the Khambo Lama's predecessor, who died last year, was a leader in the Asian Buddhist Peace Conference held in Ulan Bator in 1979 with Communist encouragement. The present Khambo Lama said he intended to participate in the next conference. He commented: ''No one can remain outside politics nowadays.''

That sentiment was apparently shared by Tibet's Dalai Lama, who also participated in the 1979 conference. It was an important gesture to Buddhist unity by the leader, who fled his own country in 1959 rather than compromise with the Chinese Communists, but is now negotiating with them. During his stay in Ulan Bator, the Dalai Lama visited the Fine Arts Museum and viewed a painting by the Mongolian artist Sharov of the coronation of the 13th Dalai Lama. The 14th Dalai Lama, pointing to the figure of the 13th, of whom he is said to be a reincarnation, was quoted as saying with a smile, ''This is me.''

On a clear, crisp October morning, we set out for the hilly northwest. Our destination: the city of Erdenet, where a mammoth copper and molybdenum mining complex is operated jointly by the Mongolians and the Russians. Heavy snows had already fallen in the Gobi desert, far to the south, where vast herds of two-humped Bactrian camels and cashmere goats are tended. The frosty winds whipping in from Siberia allow the nation only a short summer; winter temperatures plunge to 50 degrees below zero.

Our white 1969 Volga sedan was driven by a chauffeur in a rakish, brown-striped cap and muffler. His name was Dorj -''Thunderbolt'' - which turned out to be an apt description of the way he drove while still miraculously managing to avoid potholes in the two-lane blacktop road. Father of two daughters, one already a doctor and the other about to enter the university, Dorj knew only one word of English, ''Good,'' which he shouted when things went well. Our guide and interpreter was Choinkhor, a 37-year-old diplomat who had once served with the Mongolian Mission at the United Nations in Geneva. A round-faced man who wore tinted glasses and dressed nattily in a yellow shirt, gray cashmere sweater and silk muffler, Choinkhor is a scholar who is currently engaged in the first translation of Shakespeare from English into Mongolian. His name means ''Book Lover.''

We sped through pasturelands checkered with wheat fields, already turned brown. Mongolian farmers and herders produce all the food the nation needs. Its herds also provide hides and wool for export, needed to help pay for imported machinery and consumer goods. During the period of the 1975-80 economic plan, agriculture suffered a severe setback, caused by particularly harsh winters and a shortage of manpower. Virgin lands were plowed but there was no increase in grain yield. The herds grew slightly, to 23.9 million head, not much above the numbers of 20 years ago, failing to meet the Government's 25-million target. Millions of livestock have been lost in past winters, either frozen or starved on snow-encrusted fields. Students are regularly drafted to help store fodder or build animal shelters against the winter storms.

We drove through billowing clouds of dust raised by cattle and yaks being driven to a slaughterhouse 50 miles away by three swarthy Mongolian men and a pink-cheeked girl -herdsmen's children mount saddles soon after they learn to walk. They rode thick-necked shaggy ponies and carried long poles with lariats at the ends that serve as lassos. The lead yak was carrying the canvas and poles of a yurt; it can be assembled in an hour or so.

Mongolia's herdsmen are organized into 255 collectives, which average 1.2 million hectares. Moving from pasture to pasture, the herdsmen tend the livestock of the collective. They subsist on their livestock's meat and dairy products - the women can bring forth no fewer than 13 products from a mare with foal. A favorite among the men is kumiss, a fermented brew made from the milk of a mare or camel; it is nutritious but alcoholic enough - drunk by the quart as the Mongolians do it - to stagger one of their own oxen. Herdsmen are allowed to own up to 75 livestock of their own, and the Party Congress last summer voted to encourage such private efforts.