Mixed Economy

Mixed Economy

India has adopted mixed economy with the intention of procuring the advantages of both and avoiding their disadvantages. He features of a mixed economy are as follows

i)             Distribution of Ownership of Resources between Government and People:  Some resources are owned by the government and some other resources by the people.

ii)           Distribution of Productive Activities: The productive activities are divided between the government (Public Sector) and the people (Private Sector). Normally the basic industries, the Capital Goods Industries, The Heavy Industries are placed in to the public sector and the light and consumer goods industries in the Private Sector.

iii)         Welfare Motive and Profit Motive:   The activities of the public sector are guided by the welfare motive whereas the activities of the private sector are guided by profit motive. They balance each other. This ensures earning a profit and also a high level of public welfare.

iv)          Government control over Productive Activities:  So far as the public sector is concerned, it is completely under the control of the government. The private sector is indirectly controlled by the government.

v)            Regulated Prices: The prices of goods produced in the public sector are decided by the government; even the prices of the products of the private sector are regulated by the government to balance the interest of the producers on one hand and of the consumers on the other hand.

Our Choice

After getting political freedom we were confronted with the problem of choosing an appropriate system for us. We rejected total capitalism because we had experiences of exploitation and inequalities. We also rejected socialism because it does not admit freedom which was so dear to us. Hence we adopted a mixed economy model.

The Industrial Policy Resolution, 6^th April 1948:

This resolution ushered mixed economy in to India. The economic activities were divided into four categories, but the basic idea was to entrust some of them to be in the care of the public Sector and keep some others open for the private sector. This gave an assurance to the private sector that it would continue to operate in particular fields.

The Industrial Policy Resolution of Sep 1956:

This resolution further strengthened our wish to have a mixed economy led by a strong public sector. The industries were put into three categories:

Schedule A – It consisted of twelve industries. It was decided that those industries which were already in the public sector would continue with the public sector. New Industries would be setup by the public sector but existing industries in the private sector would be continued in the private sector.

Schedule B – It consisted of seventeen industries. It was decided that as far as possible new industrial units in this schedule will be setup in the public sector but if necessary the private sector may be invited to help the public sector in the development of these industries.

Schedule C – All other industries were kept open for the private sector but it was made clear that if any industry in this schedule is not developed properly by the private sector, government may develop it, thus government was not debarred from any industrial activity.

Up to 1990, we operated the mixed economy Model leaning towards public sector. The private sector got a subordinate position in India’s industrial setup. Our business units were required to prepare and execute their policies in that atmosphere. Several industries were nationalized the government also introduced very strong controls on setting up and operating the industries with the help of the Industries (Development and Regulation) Act, 1951.

A Change in this policy was made with the economic reforms introduced by the Narasimha Rao government in 1991.