Why Mixed Economy in India
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Why Mixed Economy in India

Why Mixed Economy in India? Mixed economic is not just clean capitalism nor pure socialism but a combination of the two. In this system, we find the character of both capitalism as well as socialism. After the dawn of Independence, the Government of India could not as­sume a direct responsibility for pulling its economy from the rut of long-drawn stagnation. The vicious circle of low productivity, low incomes and low savings could not be broken by the private sector alone. The overwhelming dependence of the working force on agriculture and the low rate of national savings required to be altered.

Why Mixed Economy in India?

Mixed economic is not just clean capitalism nor pure socialism but a combination of the two. In this system, we find the character of both capitalism as well as socialism. After the dawn of Independence, the Government of India could not as­sume a direct responsibility for pulling its economy from the rut of long-drawn stagnation. The vicious circle of low productivity, low incomes and low savings could not be broken by the private sector alone. The overwhelming dependence of the working force on agriculture and the low rate of national savings required to be altered. The task entailed raising the productivity in agriculture and providing social over-head capital. The former objective called for institutional changes in landownership. As regards the second objective, the major character­istics of social overhead capital—long gestation period, the 'lumpiness' of investment and the indirect routes for pay-off—made them unsuitable for initiative by the private enterprise.

Further, due to the proclivity of the private entrepreneurs towards the consumer goods sector, due to its quick profit-yielding character, shelved the growth of capital goods sector. The public sector has, therefore, got to occupy commanding heights so that it can pioneer some of the key but difficult projects. The state had, therefore, to step in to fill in the gaps.

Shortage of technical know-how and skilled management is in fact one of the prime symptoms, and one of the chief causes, of underdevelopment and this drawback itself paves the way for the adoption of mixed economy.

The desirability of the system of mixed economy is further heightened by the fact that the public sector in it acts as a sort of watchdog for the rest of the economy. It keeps a watch over the activities of the private sector and takes over all those activities which the private sector fails to discharge efficiently.

Lastly, the State has stepped in less on grounds of doctrine than of necessity. The growth of the economy planned by the State through the working of the mixed economy is much faster than when it is left rolling to and fro, like a rudderless boat occupied by a hotch-potch group of private entrepreneurs.

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