Appraisal of a Mixed Economy

Appraisal of a Mixed Economy

Though mixed economy is an inescapable for a developing economy it has drawbacks of its own. The more prominent are as follows:

1. Less Firm

The mixed economy is a very delicate form of economic system. It is prone to all types of political, social and international developments and changes. A mixed economy is characterized by co-existence of the public sector and the private sector but the relative importance of the two sectors changes from country to country and also from time to time. It is easily influenced by political changes in the country. The rise of the UPA government with the support of the leftist parties strengthened the importance of the public sector.

2. Concentration of Economic Power

The goal of a developing economy is to bring about a rapid economic growth. The government takes several steps for accelerating the pace of economic growth but they may give a scope for emergence and growth of big business houses. The economic power is concentrated in the hands of a few big business houses that can exert a strong political influence on the government. The government policies can be turned to the benefit of the big business houses.

Even the money market and capital lean towards the big business houses. They can expand at a fast rate. In India the licensing policy was actually helpful in the growth of big business houses. In 1963-64 there were only 2 monopoly houses namely Tatas and Birlas with assets exceeding Rs: 200 crore each. In 2001 – 02 there were 10 monopoly houses with assets exceeding 5,978 crores each. In 2004 only Reliance Industries was worth Rs: 71,000 crore.

3. Inefficient public sector

The public sector symbolizes state monopoly and incorporates several evils of monopoly. It looses incentive to innovate. It becomes rigid and indifferent towards the buyers. It is often characterized by bribery, corruption and favoritism . Political pressure is used in taking economic decisions. The combined effect is a huge loss on the part of the public sector undertakings. This is borne by the tax payers

4. Sliding back to Capitalism

Though mixed economy is supposed to maintain between the public sector and the private sector, in its operations it slides back to capitalism. India is a glaring example of the mixed economy adopted in 1948 became virtually a free market economy by the year 2000.

Conclusion

Thus a mixed economy is a need of a developing economy in the initial stages. But as the economy develops the private sector rise into prominence and the mixed economy is knowingly or unknowingly transformed in to a market regulated economy.