Role of money in mixed economy

 Money plays no less significant role in a mixed and a developing economy. A mixed economy is characterized by the prevalence of public sector and an equally important private sector which plays varying degrees of role. In England, the public sector serves to stabilize and regularize the imperfections in the economy and aims at providing services, which the private sector cannot provide without incurring huge social costs (like the public utility service).
Prices and money, therefore, play an important part in a mixed and developing economy in determining the volume of output and employment in the private sector, as it is solely guided by the profit expectations calculated in terms of money. Further, in a developing and expanding economy, which has adopted ‘Mixed Economy’ as the pattern of development, more and more money is needed for the rapid monetisation of the non-monetised sector of the economy.
Moreover, money will influence not only the relative shifts in the distribution of income in an expanding economy, but will also determine the allocation of limited resources to different sectors of the economy. The role of money in a developing and mixed economy assumes greater importance as money becomes an important factor of development and capital formation.
A developing economy is characterized by an increase in national and per capita income. It is an economy in motion in which stagnation lags behind and dynamic forces of growth are constantly at work to break through the old values and institutions. In the unorganized sector of such an economy, subsistence farming holds sway over the commercial farming and not much margin is left for exchange. The use of money is, therefore, at best limited. But as the economy expands, agriculture gets commercialized and urban influence penetrate into the rural sector, money is increasingly used in the day-to-day transactions, thereby lubricating the wheels of production.
In the rural areas, where it was used primarily as a store of value to fulfill the desire for high liquidity of the people and was kept in the form of gold till now, it assumes a more active and dynamic role by serving as a standard of deferred payments, a unit of account, a measure of value and a medium of payment.
Thus, the unorganized rural sector of the developing economy, which had hitherto remained unaffected by monetary influences, now comes under the purview of money and through it the rate of interest, thereby affecting income, output and employment.
In a developing mixed economy (like India), the public sector is affected by the use of money partly because goods and materials have to be purchased from the private sector at rising prices, thereby raising the cost of production of various productive units in the public sector.
Again, if the rate of interest shows a tendency to rise on account of inadequate supply of money (funds), the public sector may have to pay more on loans borrowed from the public and the burden of the public debt may be increased. Thus, the role of money in a developing and mixed economy is more complex, for its true and real nature is not revealed during transition and, therefore, lot of control is needed so as to avoid its evil effects without effecting the tempo of development.

In other words, in mixed economy of the type found in England, public sector plays the regulatory role of compensatory spending and pump priming. But in India, public sector plays a more dynamic and important role in the planned economic growth. The public sector in India has been given an important place in different Five-Year Plans of development.