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Nature of Indian economy and its journey after Independence

Opinion and perspectives by Liju Joseph for AanWorld editorial

The Indian economy could neither be termed as Socialist nor capitalist.  It is considered as an amalgamated nature of both.   The Constitution of India through The 42nd Amendment in 1976 changed the nature of the Country from a “sovereign democratic republic” to a “sovereign, socialist secular democratic republic”.  The said amendment also revised “unity of the nation” to “unity and integrity of the nation. Although the Word socialism in the preamble of the Constitution does not directly represent the economic structure of the Country but can have a direct or indirect impact on the democratic system.

Socialist economy like most of the liberal democracies around the world is a populist economic and political system where public ownership prevails which means the economy is being run by the government for the people. The very purpose of liberalisation in economics terms was to abrogate the social and economic differences among the masses.  In the present scenario, the question arises is that could we achieve our vision and alleviate the economic hardship or there is a paradigm shift in the policies.

Shifting towards capitalistic economic reforms, where Private Players control the economy with their interest resulting control on demand and supply which drives the prices according to their interest, become the driving forces behind the polarisation of wealth during the recent time.   As everyone agrees, the motive of the capitalist player is to make huge profit irrespective of social economic deterioration.The most considered attributes of economic growth under capitalism is economic inequality resulting private capital accumulation inevitably lead to the concentration of wealth in fewer hands.

On 8th November, 2016 government on India brought a prominent reform – Demonetization to eliminate the “black economy” and to put a restraint on counterfeit currency in the Indian economy and to curb corruption, terrorism, drug menace and smuggling.  The move was to put the people into a cashless (taxable) economy. More than 80 percent of India’s poor rural households had no access to formal banks and those with bank accounts often spent hours outside banks and ATMs struggling to deposit or exchange their now irredeemable currency.Daily wage earners and small cultivators could not have access to bank or post office had seemed panicking.  In the rural areas, especially women hoard money at home for the sake of saving, which can be considered as the parallel economy of the country and is the back bone of rural economy, but after demonetization, they either had deposited their money in the bank or used it for surviving the family during such hardship.  People have to cut short spending due to non-availability of cash as well as earnings which adversely affect the business of shopkeepers and vendors. The consumption levels and borrowing fall continuously, but consumption expenditures remain stubbornly high. Local income and remittances are affected heterogeneously, with households experiencing unemployment and female-headed households losing out more.  Due to demonetization, liquidity in the banking system improved and internet rates have softened. The report shows that about Rs.8.00 lakh crores bad loan could be recovered during the period. However, such increase in liquidity in the bank was an unintended consequence of demonetization and is temporary.

Although the roll out of GST have long term benefits to the economic growth, yet the major sections like real estate and other allied works had suffered huge losses.  Prolonged closed down of the Country due to Covid-19 Pandemic and heavy exodus of the Work Forces crippled the surviving economy to irrecoverable loss to some of the Sections. The paradigm shifts in the economic policies where the Govt. is moving towards capitalist economic reforms will result into polarization of wealth in the hands of few and will widen the social differences.  To facilitate such shifts, instances have reportedly came into light that profit making units were sold off at a throw away price.

It is the high time to rethink whether we need a capitalistic economy or Socialistic economy for the betterment of the Country.  Or else we need a mix of both considering the Global economic reforms.

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