India, Mixed Economy, and st the 21 Century

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?

OR
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 Scenario

The recent case of failure of Indias 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 wrong.

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 nationalism. 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 Government. 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 privatisation.

Conclusion
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
http://www.voiceofindia.in/conte nt/view/5192/72/
Group 1 Aastha Almast Manya Kapoor Yashika Saluja Shivaani Sakshi Ghai