Indian Economic

Unit -1st
By Preeti Singh

The economic system may broadly be divided as under • Capitalism • Socialism • Mixed Economy .

Capitalism “Free enterprise economy or free market economy” “Laissez Faire” (allow to do) .


Characteristics • Price Mechanism • Self Interest • Profit Motive • Competition • Freedom of Enterprise • Consumer’s Sovereignty • Labor Power is Commodity • Private Ownership • Emergence of classes • Limited role of Govt. .

Merits of Capitalism • Suitable to democratic set up • Economic freedom • Efficient use of resources • Flexibility and automatic equilibrium • Diversification and increase in production • Encourage development .

Demerits of Capitalism • Erosion of Human Values • Economic & Social Inequalities • Class Conflict & Exploitation • Too Much Wastage • Trade Cycles • Problem of Unemployment .

Meaning of Socialism • It is known as the communist economic system or centrally planned and the means of production are owned .controlled and managed by the state . • Broadly speaking .the term socialism has been called many things and many things have been called socialism “The founder member of socialism and communism is KARLMARX” • In socialism .

but for the direct service of those whom the authority or association represents.Definition of Socialism “A socialized industry is one in which the national instruments of production are owned by the public authority or voluntary association and operated not with a view to profiting by sale to other people. Webbs . ” By Prof.

controlled and managed by the government. • Class less society • Laborers are supreme • Proper recognition • Full employment .Characteristics • No private enterprise • Property and means of production are owned.

Merits of Socialism • Reduction in economic and social inequalities • Rapid economic development • Proper allocation of resources • Check on Trade Cycles • Less Unemployment • End of Exploitation .

Demerits • Lack of rational calculation of costs • Bureaucratic tendency • Increase government power .

Mixed Economy • It’s a mixer of two One of the pre-suppositions of a mixed economy is that private firms are less free to control major decision about production and consumption than they would be under capitalist-free enterprise .and that public industry is free from government restrains than it would be under centrally directed socialist enterprise .

Characteristics • • • • Co.existence of both Economic welfare Economic planning Free and controlled economic development .

Merits of Mixed of Economy • • • • Adequate Freedom Maximum Welfare Modern technology Best Allocation of Resources .

Demerits • • • • • Low inflow of foreign capital Inefficiency of public sector Maximum control on private sector Fear of nationalisation Presence of imbalance in Economy .