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Characteristics Of Mixed Economy

   Posted On :  04.05.2018 04:18 am

Characteristics Of Mixed Economy-Business And Its Environment

Characteristics Of Mixed Economy:

I. Co-Existence Of Public And Private Sectors:

In a mixed economy, one will find the existence of both the private and public sectors. In such a system, the government will undertake the responsibility to build and develop certain sectoral activities and leave the other activities for the private initiative. In india, the government announced the adoption of the mixed economy system through its 1948 industrial policy resolution. The government clearly earmarks the industries to be completely under the state control, the industries which are to be owned and controlled by the state as well as the private sector and industries which are completely left for the private sector. In this way the resolution provided for the simultaneous existence of both private and public sectors.

II. State Participation In Economic Development:

This is the second feature of mixed economy, according to which the state reserves its right to design and decide the type of development to be achieved. In such a set up, the government strives to promote the welfare of the country by ensuring social order, social justice and establishing all the necessary institutions which are required to achieve the desired pattern of growth and development.

III. Distribution Of Ownership And Control Of Resources:

This is the next feature of mixed economy. In this system, the government itself enters the field of production so that the available resources are fully utilized. This will also help to avoid concentration of wealth in the hands of a few and enable distribution of ownership and control of productive activities. As a result there is no scope for exploitation of any group, say labour, by any other group. In this way the weaker section of the community is well protected and taken care of. Only the mixed economy will enable the government to attain the objectives of the directive principles of the indian constitution.

IV. Directing The Investment In Socially Desirable Projects And Channels:

Mixed economy facilitates the flow of investment into channels which confers the society with several benefits. For example, the indian government has invested huge amount in several projects to develop the infrastructural facilities. This forms the basis for the development of other sectors. The investment in these infrastructural areas will not come forth from the private sector as the return is nil. Hence, the government in a mixed economic set up provides the thrust by developing the necessary background and strength which will encourage the private sector to invest in profitable opportunities. Thus, the government plays a key role in a mixed economic system.

V. Scope For Achieving Balanced Economic Development:

One left to itself, the private sector would establish its enterprises only in urban or sub-urban areas and that too in already well developed states. This will mean other areas will have no scope for development. But in a mixed economy, the government will itself undertake the initiative to set up industries in backward areas and encourage the private initiative to set up industries in such areas by offering several concessions and exemptions. In the absence of mixed economy, several states in india would have remained industrially backward.

VI. Ultimate Control And Regulation In The Hands Of Government:

This feature of mixed economy clearly spells out that in every activity affecting the economy, the government will be the ultimate authority. Though the private sector is assigned its role to perform, the government will still monitor and control the way in which the private initiative is performing its role. According to the 1948 industrial policy resolution, the government made it clear that the industries already established by the private sector belonging to the category in which new industries will be established by the government alone, the government would undertake the review of the working of these industries in private sector for a decade and if it’s found unsatisfactory, they would be taken over by the government. Though this was criticised as a threat to nationalisation, yet through such a provision the government underlines its authority. Similarly in the banking and insurance sectors, the government nationalised banks emphasising its powers to control and regulate any sector.

VII. Co-Operation In The Field Of Economic Development:

According to this feature of mixed economy, the government formulates the design for development and invites the private sector to participate in the development. It clearly spells out the guidelines which would govern such co-operative efforts and the limits of freedom granted to the private sector. In indian case, the government prepares the plans for development and spells out the areas left for the private initiative and the areas will be under state control. Hence, there is scope for the development of private sector, though only according to the design developed by the government.


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