Context: Recently, NITI Aayog sought to dispel the fear that India is favouring a closed economy by promoting 'Atmanirbhar' mission.
About ‘Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission)’

• ‘Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission)’ with an economic stimulus package — worth Rs 20 lakh crores aimed towards achieving the mission.
• The announced economic package is 10% of India’s Gross Domestic Product (GDP) in 2019-20.
• The Self-Reliant India Mission aims towards cutting down import dependence by focussing on substitution while improving safety compliance and quality goods to gain global market share.
• The Self-Reliance neither signifies any exclusionary or isolationist strategies but involves creation of a helping hand to the whole world.

The Mission is based on five pillars namely,

1. Economy
2. Infrastructure
3. System
4. Vibrant Demography
5. Demand

Closed Economy
A closed economy is one that has no trading activity with outside economies.

• It is also known as protectionist market, which attempts to protect its domestic producers from international competition.
• It is entirely self-sufficient, which means no imports come into the country and no exports leave the country.
• The goal of a closed economy is to provide domestic consumers with everything they need from within the country's borders.
• Example- Brazil, Cuba, and North Korea

Pros:

• It protects domestic enterprises from foreign competitive enterprise.
• It is assumed to be self-sufficient so it does not have to think about the global economy.
• It avoids exchange rate risks and global economic shocks.
• Closed economy has no exposure to financial crisis spread through international trade. Besides, the exchange rate risk does not apply because there are no transactions with the external sector.

Cons-

• Maintaining a closed economy is difficult in modern society because raw materials, such as crude oil, play a vital role as inputs to final goods makes closed economies inefficient.
• Closed economies are counterintuitive to modern, liberal economic theory, which promotes the opening of domestic markets to international markets to capitalize on comparative advantages.

Open Economy

• An open economy is a type of economy where not only domestic factors but also entities in other countries engage in trade of products (goods and services).
• Examples of open Economy- The U.S., Canada, Western Europe, and Australia.

Advantages

• Open economy leads to higher Gross Domestic Product (GDP).
• Open economies are able to get cheaper imports and can sell exports at higher prices.
• It emphasis on Improved Availability of Goods and Services.
• It leads to rapid economic growth.
• It provides an incentive for research and adoption of innovations.

Disadvantages

• Open economies are interdependent and are prone to risks.
• Intensity of the initial disturbance leads to greater damage to the interconnected open economies.
• Economies with greater restrictions on international economic transactions tend to suffer less when a disturbance originates in some other country.
• Large amounts of “footloose” (that is, short term and/or speculative type) funds are moving around the world.
• Certain varieties of imports can expose a country to undue political, economic and cultural risk.
• Large scale increase in international capital flows has resulted in heavy indebtedness.

Features

• It buys shares, debentures, bonds etc. from foreign countries and sells shares, debentures, bonds etc. to foreign countries.
• It borrows from foreign countries and lends to foreign countries.
• Normal residents of an open economy can move or be employed and are allowed to work in the domestic territory of other economies.
• Due to these reasons, Gross Domestic Product and Gross National Product are not same in an open economy.
• Prices are also found to be low and the qualities of products are better due to increased competition.
• There can be more choices for consumption.
• Open Economy is more flexible as it has a greater chance of adjusting itself with the changes taking place in world economy.