Mixed economic system in India Upsc

Mixed economy in India

Mixed economy is economy where there is public sector and private sector.

The idea of a mixed economy was thus adopted which included the liberal policy of encouraging private enterprises and also promoting the public sector for the good of society by socializing the means of production and giving powers to the state to have control over the economy.

India is an inspiration to many nations for the idea of a mixed economy.

Article related to Mixed Economy

Article 38 of the Indian constitution says ‘The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.

The system of a mixed economy works for the realization of this ideal of the constitution. The Industrial Policy Resolution of 1956 was adopted by the Indian Parliament in April 1956.

It was a guideline for the economic policy of the country. The five-year plans were made on the basis of this resolution.

It emphasized more powers to the governmental machinery so that a socialistic pattern of society could be realized.

The industries were divided into three categories:

  • Firstly, there were industries that were entirely state-owned.
  • Secondly, the category of industries which were state-owned but the public enterprises could also be included
  • Thirdly industries which were with the private sector.

The state had control over all the industries and the third category of industries could not function only for self-interest or profit motives but be regulated for the interest of the entire society.

The welfare of the community was the top priority. Planning was considered to be a prerequisite for a mixed economy.

As the benefits of the public sector and the private sectors were to be integrated for the welfare of the community, the Five Years Plans were formulated in such a manner that the objectives of economic growth and social justice could be achieved.

It also made the governments formulate appropriate plans and adopt the right strategies to bring about development in the right manner.


After the introduction of economic reforms in 1991 by the Congress government led by Prime Minister P. V. Narasimha Rao, a new industrial policy was announced in July 1991 which aimed at taking steps to reduce bureaucratic control over the Indian industrial economy and liberalization so that the Indian economy could be integrated with the world economy.

Restrictions on direct foreign investment were removed. The reforms in the industrial policy were reflected in areas such as industrial licensing, foreign investment, foreign technology policy, and public sector policy.

The seventh Five-year plan got completed in 1990. Due to the economic condition of the country, the eighth five-year plan could not be introduced in 1990.

In the years 1990-91 and 1991-92 annual plans were formulated. The eighth five-year plan was implemented in 1992.


  1. India adopted a mixed economy in which year?

India adopted a mixed economy model during its independence in 1947. As consists of both socialist and capitalist qualities.

Both the Private and Government sectors were equally given importance. Some strategically important sectors were kept by Government.

2. India adopted a mixed economy in which five-year plan?

The mixed economy was officially adopted by Second Five Year Plan. Before independence India had a ‘Laissez Faire’ economy. India started to become a mixed economy in 1947, but it was official during 1956 – 1961, the Second five-year plan.

* * All the Notes in this blog, are referred from Tamil Nadu State Board Books and Samacheer Kalvi Books. Kindly check with the original Tamil Nadu state board books and Ncert Books.