"Indian policy makers made a mistake by emphasising the role of
state in the economy. India could have developed much better if
private sector was allowed a free play right from the beginning". Give
arguments for or against this proposition.
Answers
Answer: a. In looking into the problems that surfaced in India at the time of Independence, in terms of economic backwardness, how the colonial policies reduced the country to the condition of abject poverty, there was inequality, suffering , misery, the government could not have left the economy in the private hands and that state’s intervention to regulate the economy, to reduce disparities , to redistribute resources was imperative.
b. At the same time, to completely follow the private economy model guided by the motive of profit would have enhanced the production and efficiency but the capitalist model had its own flaws. This model of development would have ignored the interest of the larger section of society. It would have also overlooked social welfare and would have indulged in exploitation of workers. It would have rather created greater disparities between the rich and the poor and also among the regions.
c. Thus, taking into consideration both the sides, our political leadership adopted a mixed economy model where both private and state/public sectors were to exist simultaneously.
d. This mixed economy model was subjected to criticisms. It was argued that no impetus was given to the private sector to grow and that the state had created enough hurdles in the form of the Licence Raj or Permit Raj for the private sector.
e. Excessive state control led to inefficiency, excessive bureaucratic control, red tapism and corruption.
f. The state intervention ended up creating a new ‘middle class’ that enjoyed the privileges of high salaries without much accountability.
g. The mixed economy model did not help in reducing poverty; it rather brought stagnant economic growth.
However, considering the circumstances existing at that time, one would argue that both the private and public sector models of development had their own flaws and that the planners and leaders acted in the larger interest of the society by adopting a mixed economy model.
Explanation:
Answer:
The point of view that India could have developed much faster if private sector was given a free play right from the start is not correct. The role of states in the economy was necessary to protect domestic industries, hence, it imposed substantial tariffs on imports. Such protected environment helped both private and public sector. A bulk of industries like railways, electricity, steel, machineries and communication could be developed in the public sector. The state intervention helped to increase technological capability within the country. The state intervention was necessary to prevent resources and wealth from getting concentrated in few people hands.