INDIAN ECONOMIC SYSTEM

                             

                            

Could  reconstruction  of  the  Indian  economy  be  left  to  the  free  play  of  the  market  forces,  implying adoption  of  capitalism?  Answer  is  ‘No’.  Because,  capitalism  is  driven  by  Self-interest  which  is contradictory  to  the  objective  of  ‘Growth  with  Social  Justice’. 

Could  socialism  be  an  ideal  choice? Answer  is  ‘No’  again.  Because,  socialism  does  not  allow  Consumer’s  Sovereignty,  while  our  planners wanted  to  protect  it.  Our  planners  and  politicians  opted  for  ‘mixed  economy’  as  an  ideal  economic system  (economic  order)  for  the  reconstruction  of  the  Indian  economy.  Because,  this  system  contains the  merits  of  both  capitalism  and  socialism,  avoiding  their demerits.They  wanted to  ensure  a perfect synchronisation/integration  between  the  economic  system  (economic  order)  and  the  goals  of  five  year plans.  Only  this  system  (mixed  economy)  was  found  to  be  most  appropriate,  given  the  needs  and means  of  the  country.

Definition of Mixed Economy:

                     

The term ‘mixed economy’ is used to describe an economic system, such as that found in India, which seeks to compromise between capitalism and socialism. In such a form of economy, the elements of government control are combined with market elements in organising production and consumption.

Here, some planning of production is undertaken by the State directly or through its nationalised industries, and some is left to private enterprise. It means that both the socialistic sector (i.e., the public sector) and the capitalistic sector (i.e., the private sector) exist side by side and comple­ment each other.

It can be described as a half way house between the market economy and socialism. In a mixed economy both public and private institutions exercise economic control. So, this type of economy tries to secure the advantages of both capitalism and socialism.

Features of Mixed Economy:

Some of the distinctive features of a mixed economy are:

(a) Co-existence of public and private sectors,

(b) Nationalisation of the vita Sectors such as key industries like power and oil, banking, insurance, transport, etc.

(c) Restric­tion on the holdings of property,

(d) Control of monopoly business of large industrial houses,

(e) Control over the price-system by the government,

(f) Social control over private institutions,

(g) Public distribution of essential goods, and

(h) Development planning for achieving faster economic growth.

In Paul Samuelson’s language, “The single most surprising development of our age was the unpredicted vigour of the modern mixed economy”. The industrial policy of the Government of India (of both 1948 and 1956) has laid the foundation of mixed economy in our country also. The said policy has clearly demarcated the respective spheres of the public and the private sectors with a distinct swing towards the expansion of the public sector.

The other measures like the Industries (Development and Regulation) Act of 1951, MRTP Act of 1969, nationalisation of major commercial banks, take­over of some sick industrial units, successive developmental plans, etc., have no doubt strengthened the base of India’s mixed economy.

Conclusion:

But the socialists do not like the mixed economy as they plead for a complete elimination of the capitalists. This view is not, however, acceptable to others. In short, the growth experience of the twentieth century revealed that a market economy, enriched by government planning and macro-economic control, could perform favourably in comparison to both capitalist and communist development.