Economic activities have been carried on since ages both by private agencies and the state. The extent and nature of their participation depends upon the stage of the economic development of society, structure of the economy and ideas of the time.
Generally, in more developed economies, role of the state in managing the economic affairs of the society is less. A society where the state has relatively small role to play in the economic affairs of the people is described as “liberal”. Societies with pervasive state presence in economic activities are socialist systems.
Economic liberalization has many meanings. In its widest sense, it stands for virtual withdrawal of the state from economic activities. However in limited sense, it means the withdrawal of direct discretionary controls by the government in favor of market forces.
Economic liberalization, in the nature of changing the nature and extent of state intervention in economic activities in India, has been attempted frequently in the past.
The one initiated in 1991 has been the most far reaching and irreversible.
Mixed Economy System in India
Independent India adopted the mixed economy model to expedite the economic growth and social development. Such a system assigns appropriate roles to both the state and the market mechanism to achieve the objective of “equitable economic growth” i.e. rapid economic growth with social justice. India learning from the experiences of the Capitalist countries like the USA, UK and Socialist countries like the former USSR decided to take a middle path combining better features of both the systems. This was logical given the backwardness of the Indian economy, low level of industrialization and presence of social ills like famines and abject poverty. In such a scenario, the state alone was considered capable of creating suitable institutions and mobilizes