Question

Define mixed economy. Why has India adopted mixed economy?

Answer 1

A mixed economy is variously defined as an economic system blending elements of market economies with elements of planned economies, free markets with state interventionism, or private enterprise with public enterprise. Mixed Economy is neither pure capitalism nor pure socialism but a mixture of the two systems. In this system, we find characteristics of both capitalism and socialism. The mixed economy is operated by both, private enterprise and public enterprise.

India adopted a mixed economy because -

1. Adequate Freedom: Mixed economy also permits adequate freedom to different economic units: (a) Consumers are free to dispose of their incomes in a manner they want, although the government does try to influence these decisions through monetary, fiscal and commercial policies, (b) Factors of production are free to choose their own occupations although again the Government may strive to create conditions favorable for the growth of chosen occupations. (c) Private initiative is always encouraged to find it’s best possible use.

2. Maximum Welfare: the state makes efforts to provide maximum welfare to workers and other citizens.

3. Modern Technology: In a mixed economy, modern technology and capital saving method are used, with the result large- scale production and profit could be possible.

4. Best Allocation of Resources: The resources are utilized in the best possible manner in the Mixed Economic System. The Central Government makes economic planning for optimum use of the resources. Thus shortage is avoided; productive efficiency increases and cyclical fluctuations are eliminated.