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India – A Mixed Economy – Explained!


In a mixed economy, private and public sectors go side by side. The government directs economic activity in some socially important areas of the economy, the rest being left to the price mechanism to operate.

Before Independence, Indian economy was a ‘laissez faire’ economy. But post-independence, she adopted the mixed economy system.

Thus, it is clear from the following arguments that our economy is a mixed economy.

(i) Coexistence of Public and Private Sectors:


The coexistence of large public sector with big private sector has transformed the economy into a mixed one. Industrial policies of 1948 and 1956 formulated by the Indian government have made the provision of such coexistence. Some basic and heavy industries are being run under the public sector. However, with the liberalisation of Indian economy, the scope of private sector has further enhanced.

(ii) Planned Development:

India had a poor industrial base at the time of Independence. A long period of economic stagnation under British rule had weakened the Indian Economy. Hence 5-year plans have been adjusted along with the Directive Principles of State Policy to rebuild the rural economy and lay foundations of industrial and scientific progress.

(iii) Plan Objectives:

In 1951, Five Year Plan was started in India and we are going with the eleventh Five Year Plan.

The basic objectives of these plans are summarized as:


(a) Economic growth;

(b) Modernisation;

(c) Self-reliance;

(d) Social justice;


(e) Elimination of Poverty;

(f) Creation of conditions of near full employment; and

(g) Satisfaction of basic needs like food, clothing, shelter, education health etc.

(iv) Role of Public Sector:

It has played an important role in the development of Indian economy. It increased the pace of economic growth and reduced disparities of income and wealth.

It seriously acts in the following areas, like:

(a) Development of infrastructure;

(b) Establishment of basic and heavy industries;

(c) Dispersing industries in several backward regions; and

(d) Imperative role in trading and marketing activities, including international trade.

(v) Private Sector:


It includes not only organised industry, but agriculture, small industry, trade and great deal of activity in housing and construction. Private sector provides employment to three-fourths of| our manpower. To control the private industrial units. Industries Development and Regulation! Act and Monopolies and Restrictive Trade Practices Act are already set up in India.

(vi) Combination between Public and Private Sector:

The second Five Year Plan and pointed out that both the sectors have to function jointly. In fact a high level of public investment it infrastructures and key industries is a1 precondition for development in the private sector.

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