The economic system in which both government and private individuals exercise economic control is called mixed economy. Mixed economy is a middle way of market system and socialist system. Mixed economic system attempts at removing the limitations of market system and socialist system and at the same time try to adopt goods elements of both the systems.

In mixed economy, public and private sector co-exit. Both private and public sectors work as complementary to each other rather than competitor of each other. Private ownership – exists in sectors like agriculture, trade, small consumer goods industry, etc. whereas the basic i.e. key industries like heavy industries, factories, factories producing defence material, railway, electricity, roads, irrigation, etc. are owned by the state i.e. government.

In this system market is not completely free. Government puts several controls. For example, state puts heavy taxes on production of unwanted things such as cigarettes. Similarly to attain balanced regional development government gives certain concessions to private owners for establishing industries in backward areas. These concessions could be subsidies, reduced or no taxes, cheap land, etc.

Thus, mixed economy is such an economic system in which economic planning is given a very important position for taking economic decisions. Since mixed economic system puts various controls and restrictions it is also called ‘Controlled Economic System’. Countries like India, France and England follow mixed economy. Limitations of mixed economy: Economic instability, lack of coordination, re-consistent economic policy, low rate of growth of economic development, etc. are certain limitations of mixed economy.