According to Lord Keynes, mixed economy is one of that has the merit of both capitalism and socialism. In this kind of economy, both public and private sector take active part in the economic development of the country. Indian economy is a mixed economy. The main aim of Industrial policy 1948, 1956, 1977, 1980 and 1991 is to achieve the economy of India are as follows:
According to Industrial Policy 1991, number of Industries reserved for the public sector is reduced to 3. These include:
- Atomic Energy
- Atomic Minerals
All other industries are now open for private sector.
Industrial licensing provisions have been made very liberal. Now only five industries are covered under licensing, i.e., one will have to obtain license before setting such industrial unit. These 5 industries are – Alcoholic products, Tobacco Products, Defense equipments, Industrial explosive and Hazardous chemicals.
Except the three industries reserved for public sector, all other industries will be developed by the private sector. However, to promote the welfare of poor and middle classes and for proper economic development of the country, the government has adopted the following three measures to control the private sector.
- Industries Development and Regulation Act, 1951: Under this act the government controls the private sector industries in a manner that it may not be possible for private sector to exploit the people and the labourers for its vested interests.
- Development of Co-operative Sector: In order to further the economic development of poor and middle class people, co-operative sector has been set up.
- Production Reserved for Small: Scale Industries: With a view to removing unemployment and inequality in the distribution of wealth and income, special encouragement is being given to development of small and cottage industries. Under policy initiatives in SSI sector in February 2008, Production of 25 items has been reserved for small scale sector.
As a result of the policy of mixed economy public sector, has also played a major role in the setting up of many basic industries like Iron and Steel, Machine Tools, Chemicals etc. to promote economic development. In 1951, Capital worth Rs. 29 crore was lying invested in the public sector. It rose to Rs. 7, 63,815 crore in 2007-08. Importance of the public sector in Indian economy is less than the private sector. With the adoption of liberal economic policy after 1951, the significance of private sector has further increased.