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‘Indian policy makers made a mistake by emphasizing 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 and against this proposition.

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At the time of independence, India had two developmental modes to choose from the capitalist model and the socialist model. The capitalist model gave importance to the private sector. The socialist model stressed the public sector. What we did was we followed a model which was a blend of both the capitalist and socialist models.

Arguments against Public Sector:

  • It did not allow the private sector to develop.
  • Large Public Sector companies discouraged private capital. To start any industry, permit and license were needed. It was not easy to get them. 
  • Because of import restrictions, the public sector did not have any challenges and so is it could manufacture low quality goods and sell them at high prices.
  • Unnecessary controls on the part of the government led to corruption and the working of the public sector was adversely affected.

Arguments against Private Sector:

  • Government did not spend enough money on public education and health.
  • Government does things only in areas where the Private Sector is reluctant to go.
  • Government made private sector profitable. 
  • The interference of government resulted in the creation of middle class people who earned big salaries and other benefits. The policy did not help the poor people.

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