Mixed Economy: This type of economic system combines the features of both the capitalist and socialist economic systems. The private sector is allowed to function on the principles of free market mechanism with guidelines provided by the government. The government controls and regulates the private sector through industrial, monetary and fiscal policies. The public sector represents the features of socialist framework. The government operates in areas reserved for government ownership and management.
Economic policies in India have been formulated in conjunction with the guidelines laid in the Constitution of India. In its Directive Principles of State Policy, the Preamble of the Constitution states that:
"The State shall in particular direct its policy towards securing -
(a) that the citizens men and women equally have right to an adequate livelihood,
(b) that the ownership and control of the material resources of the community are so distributed as best to sub-serve the common good,
(c) that the operation of the economic system does not result in concentration of wealth and means of production to common detriment,
(d) that there is equal pay for equal work for both men and women.
The economic principles were given a more precise direction with the adoption of socialist pattern of society by India. In a mixed economy of a socialist pattern of society, the role of the government is greater than free enterprise system and much less than a socialist society.