The Role of the Government


  • India embraced an economic model which has the features of both free market capitalism and socialism. The policy makers called this a model of ‘Mixed Economy’.
  • The reason for adopting such a hybrid model was to raise people’s standard of living and reduce income inequality.
  • India embraced an economic model that uniquely combined free market capitalism with that of State intervention in essential sectors of the economy.
  • The record of India’s successive governments in providing social welfare is at best mediocre.
  • The Government must build a comprehensive welfare state with a strong emphasis on redistribution of resources to poor along with provisions of social services (Public Health, Education, Equitable Institutions, Un-Employment Benefits, Old Age Pensions etc.) financed through taxation.
  • In today’s changing World of high technology, the Government must do a lot of public spending on investment in human capital and research and development.
  • On Jobs creation front, the government must adopt a judicious mix of labour market institution that includes a fairly flexible labour market allowing easy hiring and firing of employees along with strong labour associations to safeguard the interest of employees.
  • On the External front, the government must embrace globalisation, openness to trade and investment but with risk sharing approach. The government should share the risk arising out of globalisation, by training and skilling those who have suffered from the negative impact of globalisation. The process of risk sharing will make globalisation acceptable to all.
  • Adopting the above features will allow India to achieve high growth along with high social ambitions/indicators.
  • Therefore, in a nutshell, the future of India’s rapid and sustainable development lies in the following:

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