Indian policy makers made a mistake by emphasising the role of state in the economy. India could have developed much better if private sector was allowed a free play right from the beginning”. Give arguments for or against this proposition.
a. In looking into the problems that surfaced in India at the time of Independence, in terms of economic backwardness, how the colonial policies reduced the country to the condition of abject poverty, there was inequality, suffering , misery, the government could not have left the economy in the private hands and that state’s intervention to regulate the economy, to reduce disparities , to redistribute resources was imperative.
b. At the same time, to completely follow the private economy model guided by the motive of profit would have enhanced the production and efficiency but the capitalist model had its own flaws. This model of development would have ignored the interest of the larger section of society. It would have also overlooked social welfare and would have indulged in exploitation of workers. It would have rather created greater disparities between the rich and the poor and also among the regions.
c. Thus, taking into consideration both the sides, our political leadership adopted a mixed economy model where both private and state/public sectors were to exist simultaneously.
d. This mixed economy model was subjected to criticisms. It was argued that no impetus was given to the private sector to grow and that the state had created enough hurdles in the form of the Licence Raj or Permit Raj for the private sector.
e. Excessive state control led to inefficiency, excessive bureaucratic control, red tapism and corruption.
f. The state intervention ended up creating a new ‘middle class’ that enjoyed the privileges of high salaries without much accountability.
g. The mixed economy model did not help in reducing poverty; it rather brought stagnant economic growth.
However, considering the circumstances existing at that time, one would argue that both the private and public sector models of development had their own flaws and that the planners and leaders acted in the larger interest of the society by adopting a mixed economy model.
a. In looking into the problems that surfaced in India at the time of Independence, in terms of economic backwardness, how the colonial policies reduced the country to the condition of abject poverty, there was inequality, suffering , misery, the government could not have left the economy in the private hands and that state’s intervention to regulate the economy, to reduce disparities , to redistribute resources was imperative.
b. At the same time, to completely follow the private economy model guided by the motive of profit would have enhanced the production and efficiency but the capitalist model had its own flaws. This model of development would have ignored the interest of the larger section of society. It would have also overlooked social welfare and would have indulged in exploitation of workers. It would have rather created greater disparities between the rich and the poor and also among the regions.
c. Thus, taking into consideration both the sides, our political leadership adopted a mixed economy model where both private and state/public sectors were to exist simultaneously.
d. This mixed economy model was subjected to criticisms. It was argued that no impetus was given to the private sector to grow and that the state had created enough hurdles in the form of the Licence Raj or Permit Raj for the private sector.
e. Excessive state control led to inefficiency, excessive bureaucratic control, red tapism and corruption.
f. The state intervention ended up creating a new ‘middle class’ that enjoyed the privileges of high salaries without much accountability.
g. The mixed economy model did not help in reducing poverty; it rather brought stagnant economic growth.
However, considering the circumstances existing at that time, one would argue that both the private and public sector models of development had their own flaws and that the planners and leaders acted in the larger interest of the society by adopting a mixed economy model.
