India , Mixed economy, and the 21st Century

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Transcript India , Mixed economy, and the 21st Century

India, Mixed
Economy, and
the 21
What is a Mixed Economy?
• As the name suggests, “An economic
system including features of both public
and governmental control.”
• Mixture of Capitalism and Socialism.
• Private economic freedom co-existing with
centralized economic planning and
government regulation.
India: A Mixed Economy
• Post Independence (1947), Pandit Jawaharlal Nehru
proposed the idea of “Mixed Economy”.
• Initial motive: to reduce social and economic stress.
• Priority on “Economic growth with social justice”.
• Commanding role of state in industrial production and
import substitution strategy.
• Role in agriculture limited to infrastructure
development, irrigation and trade.
• Resulting low GDP at 3-4% p.a.
• Finally, Balance of payment crisis of 1991 initiated
Economic Liberalization.
Two contradicting views:
• Should India adopt Free enterprise or the
Capitalism model such as in USA?
• Should India continue to work on the
Mixed Economy Model as it has done
since independence?
Such an argument is
very controversial and
we shall discuss both
the sides of the coin.
Preference for Capitalism
• The recent case of failure of India’s esteemed airline
services “Air India” can be attributed to faulty
government enterprise handling by Mr. Morarji Desai.
• The destruction of Air India started with the airline
becoming a public sector undertaking in 1977.
• Once JRD Tata moved out, babus came in, AI was used
and abused by ministers and bureaucrats.
• Motives were short term planning and sightedness which
resulted in inept and demotivated management, political
interference, and corruption.
• Perfect example of government run enterprise gone
Preference for the Mixed
Model Scenario
• In wake of current recession, the recent collapse of GM
in USA is a perfect exemplar of failure of free
enterprise/capitalism model.
• Iconic GM filed bankruptcy with government acquiring
60% of the auto giant signals nothing short of
• Hence, mixed economy model, where government
produces for social interest is preferable in a
developing economy like India, which cannot yet
afford disasters like GM.
• Mixed economy model was adopted to safeguard Indian
companies from competition and foster economic growth
in backward regions.
Public Sector Performance
in past years
• According to 2006-2007 estimates, the public sector in
India earned profits to the tune of Rs 81550 crore and
achieved a turnover of more than Rs 9,60,000 crore.
• The Central public sector enterprises contributed as much
as Rs 1,26,900 crores by way of taxes and more than Rs
20800 crores by way of interest and dividend to the Central
• The Public Sector employs 16 Lakh people and there by
providing employment to sizable section of the population.
• The national policy on public sector envisages that
generally profit making PSUs do not qualify for
• Thus what India needs is to stick to mixed economy
model to protect and generate jobs and usher balanced
development of backward regions. We need not opt for a
blind private enterprise.
• Its true that inefficiency and failure to bring profits
characterized the public sectors few years ago.
• With competition lurking from liberalized economies, the
public sector too has pulled up its socks.
• Indiscriminate privatization only encourages
businessmen with profit motives, which a developing
nation like India cannot afford.
Need of the Hour
• We need to invent India specific solutions for the
economic problems and not to go by the wish list of the
Private Industry and Private Financial Institutions.
• There need to be healthy but friendly competition to offer
goods and services to the common man at a reasonable
and affordable cost.
• If the Government opts for Disinvestment as the policy
option, it endangers employment opportunities and
balanced development of the nation.
• Private Enterprise alone is not the mantra that can
ensure rapid development and growth of the nation need
to be kept in mind.
Thank You
Group 1
Aastha Almast
Manya Kapoor
Yashika Saluja
Sakshi Ghai