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Indian Economic Policy

Notes 2.4 Summary

• Mixed economy is the outcome of the compromise between the two diametrically opposite
schools of thought—the one which champions the cause of capitalism and the other which
strongly pleads for the socialisation of all the means of production and of the control of the
entire economy by the state.
• India is regarded as a good example of a mixed economy. Under the Directive Principles of the
India Constitution, it has been laid down that the State should strive “to promote the welfare of
the people by securing and protecting as effectively as it may a social order which justice,
social, economic and political, shall inform all the institutions of national life.”
• A mixed economy is necessarily a planned economy. The public sector will have to be operated
according to certain priorities and to achieve certain specified social and economic goals.
• The experiment of mixed economy in India has been carried on for over six decades now. Both
Central and State Governments in India set up several public sector enterprises in many lines of
production, trade and finance.
• Further, the private sector has been constantly and incessantly trying to evade and, in many
ways, distort the planning process. The private sector has corrupted the bureaucracy and the
politicians-in-power.
• The India National Congress, under the inspiration of Jawaharlal Nehru, set up the National
Planning National Planning Committee (NPC) towards the end of 1938.
• The Directive Principles of our Constitution laid down : “The State shall, in particular, direct its
policy towards securing - (a) that citizens, men and women equally, have the right to an adequate
means of livelihood : (b) that the ownership and control of the resources of the community are so
distributed as best to subserve the common good : (c) that the operation of the economic system
does not result in the concentration of wealth and means of production to the common detriment.”
• The First Five-Year Plan expressed clearly the long-term objectives of goals of economic planning
in India as follows : “Maximum production and full employment, the attainment of economic
equality or social justice which constitute the accepted objectives of planning under present
day conditions are not really so many different ideas but a series of related aims which the
country must work for.
• Unemployment and under-employment are important causes of poverty in India. Hence, from
the very beginning, removal of unemployment and underemployment has been an important
objective of economic planning in the country.
• In an unplanned society, various types of retrogressive forces operate, such as inequalities of
income, poverty, absence of equal opportunities for progress, etc. India’s economic plans made
conscious effort to remove all these retrogressive forces and foster social as well as individual
development.
• On paper, the long-term objectives of India planning appear to be perfectly sound and would
achieving. While the first two are economic objective and relate to increase in income and
employment, last two are social objectives and relate to the distribution of wealth and income
and the establishment of an egalitarian society in the country. But these sets of objectives
obviously conflict with each other. For instance, the objective of rapid economic grow based on
heavy investment and development of cantal-intensive production could raise national income
but was bound to lead to concentration of wealth income and accentuation of income disparities.
• The basic objectives of our Five-Year Plans were development along socialist lines to secure
rapid economic growth and expansion of employment, reduction of disparities in income and
wealth, prevention of concentration of economic power and creation of values and attitudes of
a free and equal society.” In order achieve these objectives, the planners formulated a strategy
of planned economic development.
• Nehru-Mahalanobis model of development emerged as the driving force of the strategy of
development adopted in the mid-fifties at the time of formulation of the Second Five Year Plan.

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