Question

“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.

Answer 1

No, the above statement is not perfectly true because state’s intervention was mandatory to regulate country’s economy
after independence immediately. Indian did not follow either capitalist model of development or socialist model completely. Instead she adopted the model of‘mixed economy’ to be criticised from the right and the left:

(i) Private sector lacked enough space and stimulus to grow.

(ii) Licensing and permits for investment in private sector created hurdles for private capital accumulation.

(iii) The state control beyond the limits led to inefficiency and corruption.

State control was emphasised :-

1. State helped the private sector to make profits by intervening only in those areas where the private sector was not prepared to go.

2. Instead of helping the poor, the states intervention ended up creating a new class that enjoyed the privileges of higher salaries without much account-ability.