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Mixed economy in India

What is a mixed economy? 

The traits of capitalism and socialism are combined in a mixed economy. In essence, a nation with this kind of economy has both public and private sectors, with private firms aiming for profit maximization and the government sector focusing on citizen welfare. Consequently, these groups coexist and help a country’s economy expand more quickly.

A Mixed Economy is a combination of capitalism and socialism that combines the best of both worlds. Characteristics of both capitalism and socialism may be found in this system. Both private and state enterprises operate in the Mixed Economy.

Private industry is not allowed to operate freely and is subjected to price controls. On the other hand, the government intervenes in various ways to control and regulate private business. It has been recognized that the free operation of a private business causes multiple issues. The United States, the United Kingdom, Iceland, India, and Sweden are just a few nations that use mixed economies.

mixed economy

“One of the presuppositions of a mixed economy,” according to J. W Grove, “is that private firms are less free to control major decisions about production and consumption than they would be under capitalist-free enterprise, and that public industry is more free from government restraints than it would be under centrally directed socialist enterprise.”

India as a mixed economy 

India has a mixed economy, which means that public and private enterprises coexist. This is due to the adaptation of industrial policy in 1948 and 1956. However, they do not function freely; instead, they are governed by various processes, such as policies enacted by governments.

Furthermore, given India’s economy’s stagnation under imperial control, new policies were implemented to boost economic growth, creating the framework for scientific, industrial, and technical advancements. For example, during independence, India’s GDP was Rs. 2.7 lakh crore. After seventy-four years, India’s GDP in 2021 reached Rs. 135.13 lakh crore, making it one of the world’s most significant economies.

In addition, once India’s Economy was liberalized in 1991, the country’s development and expansion accelerated dramatically.

Since 2000, India has been one of the world’s fastest-growing economies. In terms of nominal GDP, it is also the world’s fifth-largest economy.

india gdp growth: Indian economy to contract by 7 pc in FY21: SBI Research  - The Economic TimesOverall, India’s GDP increased at a 5% annual pace in 2019. This expansion was fueled by robust demand for the country’s products and services and increased industrial activity. The nation, which used to be a significant British tea and cotton supplier, now has a more diverse economy. The service sector accounts for the bulk of activity and development. In international economics, India is today regarded as a “global actor.”

The response to the COVID-19 epidemic hurt India’s Economy badly in 2020-2021. In the second quarter of 2020, India’s GDP was roughly 24% lower than in the second quarter of 2019, as COVID-19-motivated restrictions on all non-essential companies severely slowed economic activity.


After achieving independence from the Britishers in 1947, India established a centrally planned economy (also known as a command economy). The government makes the most economical choices affecting product manufacture and distribution in a centrally planned economy.

The government concentrated on growing its heavy industrial sector, but this strategy proved unsustainable. India started to remove its economic constraints in 1991, and the country’s private sector grew due to the increasing liberalization. India is now classified as a mixed economy, with both the private and public sectors coexisting and the country relying heavily on foreign commerce.

s&p: Indian economy picking up steam after second Coronavirus wave, says  S&P - The Economic TimesCitizens have the freedom to pick their jobs and create their businesses. However, the government retains a monopoly in critical sectors of the economy, including the military, electricity, banking, and other businesses. From $288 billion in 1992 to $2.66 trillion in 2020, the country’s GDP has increased at an exponential rate.

Feature of India’s mixed Economy

1. Economic growth that is both regulated and unrestricted

The goal of a mixed economy is to remove the drawbacks of other popular economic systems. As a result, the government stimulates free economic activity in such an economy while still implementing the necessary controls.

2. Putting the well-being of citizens first

Economic well-being is one of the most noticeable characteristics of a mixed economy’s success. As a result, governments’ different fiscal and monetary policies encourage private companies to contribute more to economic well-being.

In contrast, India’s public sector creates jobs for the people while avoiding regional disparities. Furthermore, its pricing strategies are determined by economic well-being rather than profit maximization.

3. Financial planning

In a mixed economy like India, the government is in charge of economic planning and implementing various policies and actions. Consequently, public-sector businesses follow a set of strategies to attain particular specified objectives.

Similarly, private organizations function according to a set of pre-determined rules. Furthermore, the government guarantees that development is hastened and coordinated via several programs designed to support growth in both sectors of the Indian economy.

4. Price controls

The Indian government has the power to impose pricing control and regulation. However, it typically does not disrupt the existing pricing structure, enabling sectors to set their prices for products and services.

However, in the case of a national emergency or disaster, it has the authority to impose price controls and distribute supplies via the Public Distribution System (PDS).

Demerits of Mixed Economy

Reviving the Indian economy- revisiting Mr. Keynes | ORF

  • Corruption and Black Marketing: Corruption and black marketing abound in this system. The public sector benefits political parties and self-interested people unfairly. Consequently, many ills emerge, including black money, bribery, tax evasion, and other nefarious activities. All of this adds to the system’s inefficiency.
  • Mixed economies, according to some economists, are the most unstable. The public sector gets rewarded the most, while the private sector is restrained.
  • Sector Inefficiency: Both sectors are inefficient under this setup. As a consequence of its lack of total independence, the private sector is ineffective. As a consequence, the government is rendered ineffective. In specific ways, these sectors are not just competing but also complementary.
  • Ineffective Planning: There is no such thing as comprehensive planning in a diverse economy. Consequently, the government lacks control over a large part of the economy.
  • This system lacks efficiency, and both sectors suffer as a consequence. This is because government employees do not carry out their obligations appropriately in the public sector. In contrast, in the private sector, efficiency suffers because the government imposes too many restrictions in the form of regulations, permits, and licenses, among other things.

Edited by Prakriti Arora



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