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A definition of a mixed economy
A "mixed" economy is a mix between socialism and capitalism
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A mixed-economy is a sign of intellectual chaos
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A mixed-economy is always in flux
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When a particular policy fails, it is propped up by other regulations in
the hopes that more control will produce better results
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The Economic System of India
Before the last decade, the 1990's, India was probably on the short list of almost every economist outside of
India of the countries with the worst economic systems
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They hypocritically
aver that they are doing what they are doing in the interest of the people of India
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The fact that the result has
been some horrible mixture of state capitalism and moribund corporatism is usually attributed to incompetence
and ineptitude on the part of the bureaucracy
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" The policies implemented by the Government of
India before the last decade were brilliant only in maintaining the power and influence of the bureaucrats
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The bureaucracy has been rather competent in generating excuses for the failure of their policies
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What the bureacrats dare not say is that in maintaining a pool of economic rents
the bureaucrats' policies were an outstanding success
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Indians out from under the
oppression of the bureaucracy of the Indian Government have succeeded spectacularly in professions and
business
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Nehru chose the goal of economic self-sufficiency with economic development to be achieved by central
planning modeled on that of the Soviet Union
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India got domestic production but it was production of low quality, obsolete products
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The two makes of automobiles produced in India, copied from models of the British Austin and Hillman of the
1950's, remained unchanged for more than forty years
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The first five year plan (1951-55)
called for the planned development of only a few industries, the ones that private industry had not developed for
one reason or another
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The second five year plan (1956-1961), the product of P
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Mahalanobis' work, was more inteventionist
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It sought
to eliminate the importation of consumer goods, particularly luxuries, by means of high tariffs and low quotas or
banning some items altogether
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License were
required for starting new companies, for producing new products or expanding production capacities
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Not only did the Indian Government
require businesses get bureaucratic approval for expanding productive capacity, busineeses had to have
bureaucratic approval for laying off workers and for shutting down
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When a business was hopeless an owner might take away, illegally, all the equipment that could
be moved and disappear themselves
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One can imagine how chaotic and unproductive a business would be
under such conditions
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It also might require the production of certain goods such as cheap cloth for the poor
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Ultimately this meant starving agriculture to
feed inefficient industries the Government favored
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The net effect of the Government programs was to take away resources from agriculture in the countryside to
give it to favored businesses in the cities
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These programs to help agriculture and the countryside generally
came from resources which the Government took away from agriculture and the countryside
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Comparative Growth Rates
of Developing Economies
Average Annual Rates 1960-88
Industrial
Production

Country

GDP

1960-1980
India

1980-1988

1960-1980

1980-1988

4
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6

3
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4

* - 1970-1980
Source: The Economist May 4, 1991, Survey page 7

Economics

Inflation 7
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a
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47 Indian rupees (48
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3bn
Inflation: 4
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Cheap labor
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Vibrant film industry: "Bollywood
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Growing competitiveness in world market, reflected in strong export growth
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Despite strong objections from
opposition parties, India ratified the GATT world trade agreement in 1995
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Much of this has gone into the power sector
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Weaknesses
A large budget deficit dogs the economy
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The value of the rupee has declined sharply
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The prestige of Bollywood has
been damaged by allegations of underworld connections
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From a highly protectionist mixed
economy, which succeeded in building the basis of a modern industrial state, India has to a large
extent converted to a free-market economy and is entering the global marketplace
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The
United Front and BJP-led governments in power since 1996 have not undone these reforms,
though they have been criticized for not being wholehearted about driving them forward
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EXPORTS

IMPORTS

ECONOMIC PERFORMANCE INDICATOR

From "The Financial Times World Desk Reference" © Dorling Kindersley 2004



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