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Mixed Economy

Mixed economy is the term used to describe a compromise between capitalist and socialist economic systems. The idea underlining the policy of mixed economy is to combine the advantages of capitalist system, namely: increased productivity improvement in the efficiency of utilization of resources, progress of science and technology, and the advantages of the socialist system, like reduction of inequality of income, regulation and control of private property, and provision of social security, etc.

The distinctive mark of mixed economy is that a well defined role is assignment the public sector to ensure faster development of the economy and egalitarian distribution f national income. Although the private sector is permitted effectively its activities on the profit motive, exploitative character of this motive is effectively curbed by the government. In a mixed economy, the government has to play as important role in the economic sphere. It must ensure faster economic development and must, to that end, undertake to provide social overheads, industrial climate, and industrial base. It must also ensure that the fruits of economic development are as widely distributed as is fair and possible. It must take adequate steps to make certain that inequalities between man and man, class and class, and region and region, are reduced to the minimum.

In India, we have a mixed-economic system where both the public and private sector co-exist. The characteristics of a mixed economy are described below:

(i)    Co-existence of public and Private Sectors. In a mixed economy, some fields of production are exclusively allotted to the public sector while others are open to the private sector. In India, some sectors like defense, nuclear energy and public utilities, are reserved for the public sector. In other areas, both the private and public sectors can set up their units.

(ii)    Central Planning. In a mixed economy, there is a great role of central planning. In India, we have planning Commission which is responsible for drafting ‘five year plans’. The plans are prepared keeping in view the political ideology, resource constraints and social aspirations of the nation. Each plan lays down the socio-economic objectives, sets physical targets, specifies the sources of funds for implementing the plan and also prepares specific programmers for implementing the plan.

(iii)    Economic Welfare. The purpose of mixed economic system is faster economic development accompanied by a sufficiently rapid increase in opportunities for employment. In addition, the public sector undertakes to reduce inequalities by starting industries in the less developed regions and by opening employment opportunities for backward classes.

(iv)    Market Mechanism. The output of the public sector has to be sold because there is no question of self-consumption. Event the goods produced in the private sector are largely marketed. A mixed economic system is, therefore, known for the market mechanism. La of demand and supply plays and important role subject to the intervention by the Government.

(v)    Role of Profit Motive. In a mixed economy, profit motive is allowed to play its role within certain limits. The private sector is permitted to function in such a manner that gains are made by an increase in efficiency and not by exploitation of customers and workers. The public sector is mainly guided by social interest. But an element of profit is also there. It is the profit motive which, in combination with the pricing system, determines the allocation of resources. But profit motive is not allowed unrestricted operation in a mixed economy.

(vi)    Role of Government.  In a mixed economy, the government plays a prominent role in the economic sphere. The public sector covers a substantial field and the government sees to it that it is administered and managed efficiently in the interest of social good. It must step in when and where private enterprise operates against the socio-economic goals of the nation. It must see to it that industrial enterprises, public as well as private, are so located that all regions and classes march forward together on the road to economic development.

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