Correct Answer - Option 3 : Mixed Economy
The correct answer is Mixed Economy.
- In a capitalist economy, production is done on the basis of demand and it is distributed on the basis of purchasing power. If people have resources then only they can afford the goods in a capitalist society. The state has no role in this. At the time of independence poverty and inequality were prevalent in India that’s why it was avoided.
- Such a society did not appeal to Jawaharlal Nehru, for it meant that the great majority of people of the country would be left behind without the chance to improve their quality of life.
- In a socialist society, the government decides what goods are to be produced according to the needs of society.
- The government assumes to know what is good for the people of the country and so the desires of consumers are not given much importance. The government decides about production and distribution.
- The Indian economy has a socialist tilt but it is not a socialist economy as the public sector has been present only in the essential sector, others have been left open to the private sector.
- Most economies are today mixed economies, i.e. the government and then market together answer the three questions of what to produce, how to produce, and how to distribute what is produced.
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In a mixed economy, the market will provide whatever goods and services it can produce well, and the government will provide essential goods and services which the market fails to do.
