Government of India adopted mixed economy strategy after the independence from British Colonialism. A mixed economy is a system which comprehend the blending elements of market economies with the elements of planned economies with the hint of free market with state intervene such as with private enterprise and public enterprise.
A mixture of markets with state intervention referring to capitalist market economies with strong regulatory oversight, intervening policies and governmental provision of public services.” This type of economy is apolitical in nature and holding the same substance of private and public enterprise.
In Western world, capitalist economy containing more dominance of private ownership with profit seeking enterprise and accumulation of capital as consider it fundamental driving force for the growth. In such system, markets are tend to flatulent between government and regulatory control which influence indirect macroeconomics influence through fiscal and monetary policies. India has mixed economy culture since independence. The second Five Year Plan infused the economy of socialist pattern for India. Planned Development yielded the socialist strategy for economic planning and Development of public sector. As India adopted mixed economy, Economic planning associated with capitalistic framework. Indian economy augment in Monopoly trends support mixed economy, predominance of
markets mechanism which create the prevalence of markets for goods; this determined the demand and supply created private ownership of production.
Since the mid 1980s, India has opened up its markets through economic reform. Several industrial policies, Indian economy provided space for private sector but before 1980 the participation of private sectors in economy was very low. Indian economy started to become mixed economy in 1980s and India’s International trade started at large scale.
There are few reasons that why India inclined towards mixed economy and got the base of liberalization, pravitalisation and globalization and switching from agrarian economy. The low growth rate of the economy of India before 1980 which was stagnant from 3 to 3.5% from 1950s to 1980s while per capital income averaged 1.3%. At the same time, Pakistan grew by 5% Thailand by 9%, South Korea by 10%. Before 1990s, only four and five working license were given to steel, electrical, power and communication. License owners large enterprises.
A huge power sector emerged as state owned enterprises made large losses. Income taxes and custom department become inefficient in checking tax evasion. Infrastructure investment was poor because of the public sector monopoly. License Raj established the irresponsible bureaucracy and corruption in the enterprises and corruption flourished in this system.
In 1990, Prime minister PV Narasimha Rao, with Finance Minister Manmohan Singh initiated the Economic Liberalization in 1991. Reforms vanished license Raj, reduced tariffs and interest rates and ended many public monopolies, allowing Foreign investment in many sectors. Through the Economic Reform of 1991, Indian economy introduced liberalization privatization and Globalization as part of Structural Programme.
Liberalization has equated a change of reorganization of institutional space; it is a relationship of economies in the direction of market principles. Liberalization create jobs, increase competition, Private companies buys land and develop cities.
Privatization reduce the government’s political interference. It improve the efficiency of profit incentive; improve operational efficiency in order to reduce their costs and improve on profits. Produce good quality products and provide better services and reduce wastages and utilize the resources.
Globalization encourages producers and consumers to benefit from division of labor. More free market movement between countries. Gains from the sharing of ideas skills technologies across national borders. Opening up of capital markets allows developing countries to borrow money to over a domestic savings gap. Increased awareness among consumers of inequality and climate change. Competition pressure from Globalization may improved the governance.