Is India A Capitalist Economy?

Capitalist society, is an economic system in which most of the decisions are taken by the private owners rather than by the state, the means of production are largely privately owned and focused towards profit making.

It can also be defined as a trade in which price of the commodity is solely a function of the number of buyers and sellers in the market. Capitalism came after feudalism when serfs protested against feudal lords and merchants. The idea was to provide free market and ownership for the private property. Adam Smith, the father of Economics had talked about how division of labor can help the company to make profit.

The main features of absolute Capitalist economy are property is controlled by private owners, no interference of state, companies or institutions would work for their self-interest, sovereignty for the consumers, freedom of enterprises and the profit making motive of the factories. In our country there are markets which follows the characteristics of the capitalist economy like e-commerce companies, private colleges/schools, telecommunication industries, textile market, start-ups etc. As a developing country, we are trying to liberalize the market as much as possible. There are sectors in which 100% of Foreign Direct Investment is allowed. We also have well defined property rights and commercial laws. Can we say that our economy is capitalist?

Now let us understand what is Socialist economy? In socialist society the population collectively owns and controls the means of production and distributes the end result proportionately. The control is usually delegated to the states while the distribution comes in the form of social development of the society by providing them the basic necessities. In our nation we have public enterprises as well which are controlled by the government for example Public Sector Units (PSUs), Railways, Government Schools/ Colleges, Government hospitals etc. So can we say we are socialist economy?

In India, for instance steel industries we have public enterprises as PSU’s (SAIL, NMDC etc.) and private enterprises as Tata Iron and Steel Authority (TISCO). As per the Public Enterprises Survey, SAIL has struggled to execute its expansion and modernization plan for capacity expansion over the past decade. While on the other hand Tata steel has increased capital substantially ^[1]

India’s top 1% of the population holds 73% of the wealth while 67 crore citizens, comprising the country’s poorest half, saw their wealth rise by just 1% ^[2]. The poor and middle class of the country are still struggling to fulfil the basic need of their family. At the same time India has the third highest billionaires in the world. Our Country has a problem with distribution of wealth, since many residents are poor and have no way out of poverty. Considering the above examples where we have both public, private and public-private enterprises, I think India has a mixed economy.

(Saanjuli Gupta is a student of Master of Public Policy in National Law School of India University, Bangalore. She has work experience of 3 years in development sector.)

REFERENCES

1) “SAIL, BSNL, Air India Together Account for 41% of Total …” Accessed July 21, 2018. https://www.bing.com/cr?IG=CBA01F2E49E24E40BD3779FF90EDC150&CID=3F9F49CDD38865E01FF545FED27564BC&rd=1&h=lNvIjXMkaLOtkdw8jYBc_THe2URtH3Rh9w_Vz6PLQV8&v=1&r=https://www.firstpost.com/business/sail-bsnl-air-india-together-account-for-41-of-total-public-sector-units-losses-in-fy16-3348580.html&p=DevEx.LB.1,5461.1.

2) Kane, Sharon, and Mark Kirby. “Wealth, Income and Inequality.” Wealth, Poverty and Welfare, 2003, 4-25. https://www.businesstoday.in/current/economy-politics/oxfam-india-wealth-report-income-inequality-richests-poor/story/268541.html.