Between 1947 and 1990, which type of economic system did India largely follow?
Show answer & explanation
Correct answer: C
Explanation
Correct Answer
Mixed Economy
Explanation
Between 1947 and 1990, India largely followed a Mixed Economy model. After gaining independence, India's leaders, particularly its first Prime Minister Jawaharlal Nehru, chose a path that combined elements of both capitalism and socialism. In this system, both the public sector (government-owned enterprises) and the private sector co-existed. However, during this specific period, the state maintained strong control over key heavy industries, transport, and infrastructure, heavily regulating the private sector through a system of permits and quotas often referred to as the "License Raj."
The definitions of the other economic systems mentioned in the options are as follows:
Pure Capitalism is an economic system where the means of production are entirely privately owned, and production, prices, and incomes are determined by free-market competition rather than government planning.
Pure Socialism is an economic system where the state or public entirely owns and controls the means of production, distribution, and exchange, eliminating private enterprise.
Laissez-faire Economy is a strict form of free-market capitalism where government intervention in the economy is completely absent or minimal, letting the market forces operate entirely on their own.
Key Points
India's mixed economy during this phase was guided by Five-Year Plans, inspired by the Soviet model, to systematically develop infrastructure and promote self-reliance.
The heavy reliance on state control and regulations eventually led to economic stagnation and a balance of payments crisis by 1991.
This system underwent massive transformation in 1991 when India introduced the LPG (Liberalization, Privatization, and Globalization) reforms to open up the economy.
Important Questions and Answers
Question: In which year did India introduce major economic reforms shifting away from the strict regulations of the mixed economy model?
Answer: 1991.
Question: What popular phrase was used to describe the elaborate system of licenses, regulations, and red tape that monitored private businesses in India before 1991?
Answer: License Raj.