After studying this lesson you will understand the following 14.1 Meaning of Public sector Importance of Public Sector Role of Public Sector in Economic Development Role or Private Sector in Economic Development Introduction
14.2 Role of Public Sector in India 14.2.1 Share of Public Sector in Employment 14.2.2. Volume of Sales of the Public Sector 14.2.3 Share in Saving and Capital Formation 14.2.4. Share of Public Sector in Capital Stock 14.2.5. Strong Industrial Base in India 14.2.6. Dominance of Public Sector in Critical Areas 14.2.7. Export Promotion 14.2.8 Import Substitution and Foreign Exchange Saving
14.2.9. Contribution to Central Exchequer 14.3 Role of Private Sector in Indian Economic Development 14.3.1 Private Sector and General Economic Development 14.3.2. Private Sector and Agriculture 14.3.3. Private sector in Trading 14.3.4. Private Sector in the Indian Economy 14.3.5. Private sector and small-scale and Cottage Industries 14.4 Summary 14.5 Check your Progress
14.6 Key Concepts 14.7 Self-Assessment Questions 14.8 Answers to check your progress 14.9 Suggested Readings
14.1 Introduction:
Prior to independence, there was virtually no Public Sector in the Indian economy. In the Post-Independence period, the expansion of public sector was undertaken as an integral part of Industrial Policy 1956. As a result of deliberate policy of encouraging public sector in the Industrial policy resolutions, heavy investment was made in the public sector, so as to facilitate the process of industrialization in the country, by establishing heavy and basic industries and create infrastructure of power, electricity and transport. Public sector undertakings are functioning at Central level and State level. Organizationally, there are four types of public sector enterprises: a) Departmentally managed b) Managed by independent boards c) Run as public corporations d) Organized as Corporations
To understand the role of the public sector, we must have an idea about its size in the context of the Indian economy. For a comprehensive view of the entire public sector, we should cover besides autonomous corporations, the departmental enterprises. While doing so, not only the enterprises owned and run by the Central be covered, but the enterprises run by the State Governments and local bodies should also be included. It would not be appropriate to use any single measure to estimate the size of the public sector because there are numerous measures such as employment, investment, value of output, national income generated, savings, capital formation and capital stock. Let us try to understand the role of public sector by considering each measurement.
the public sector since the days of the British rule. However, in manufacturing, the share of the public sector was about 27 per cent of the total since its entry in this area is of recent origin. With the nationalization of Coal mines and takeover of 20 major commercial banks, there has been a significant improvement in the position of the public sector. In overall sense, the public sector is a big employer in so far as the organized sector of the Indian economy is concerned.
installation, of goods partly to meet the needs of depreciation of the capital stock and partly to meet the needs of depreciation of the capital stock and partly to increase the size of the total capital stock on a net basis. But the amount of capital employed per unit of output in the public sector is far greater than in the private sector. This is largely due to the differences in the nature of investment in the public sector. The important features are: a) a good part of the public sector investment goes into economic infrastructure which is essential for economic development but does not contribute to output in due normal sense of the term. b) Public sector has played a significant role in developing the key sectors of the economy and these sectors by their very nature are areas of high capital intensity. c) The projects in the public sector have longer gestation periods. Partly this is due to the technological nature of investment in heavy and basic industrial and partly it is due to the inefficiencies in public agencies in the installation of these projects. d) There is lower utilization of capacities in the public sector and this is also responsible to an extent to lower output capital ratios. e) Areas of higher output-capital ratios fall largely or wholly in the private sector. This includes consumer goods industries, small-scale and cottage enterprises and agriculture.
left to the private sector. Therefore, public sector succeeded in laying a strong industrial base though there are still many weaknesses and gaps in the industrial structure of the country.
Second World War stimulated industrial development. But the greatest stimulant was given to industrialization by the national government after independence. The private sector was given sufficient scope to produce intermediate goods and machines also, and as a consequence a whole range of industries producing chemicals, paints, plastics, machine-tools, ferrous and meets, rubber etc., have come up. India has become self sufficient in many consumer goods. The private sector has become as capable as to help other third world countries in their economic development.
four decades of economic planning, and consistent effort to give a boost to the economy through creating a vibrant public sector. The dominance of the private sector is so overwhelming and as such, the Indian economy cannot really be called a mixed economy; much less a socialist country.
14.4 Summary:
Indian economy is passing through a process of crucial change, for the last few decades, we have been pursuing a path in which the public sector was expected to be the engine of growth. However, towards the middle of the seventies, disenchantment with the public sector had started, but the voices of protest were feeble and were sporadic and unarticulated. The failure of public sector to fulfill the role assigned to it resulted in the protest becoming louder and more articulate. Moreover, it is inconceivable that privatization in this country will be accepted by the society as an end in itself, since there is no consensus in favor of market solutions and property rights, nor are these considered as prime movers for much needed social and economic change. These real issues centre on the alleviation poverty and upgrading of technology in highly differentiated society of continental dimensions. This that privatization will have to be viewed essentially as the best possible means of achieving pre-determined ends, and ensuring that it does not distort the parameters of such ends.
14.6
1. Prior to 1947 virtually there was no public sector. 2. State Level Public Enterprises related information compiled by Institute of Public Enterprises. 3. Company form of organization is not a public enterprise. 4. During the 6th plan about one-half of capital formation is from public sector. 5. Dividends are one of the forms of public sector contribution to Central Exchequer. 6. Large industrial houses will be more in public sector.
14.7 Self-Assessment Questions Short answer type questions: 1. What is Public Sector? Explain its share in employment.
2. Explain different forms of Public Sector Enterprises. 3. Explain the share of public sector in capital stock. 4. Distinguish between Public and Private Sector.
Long answer type questions: 1. Evaluate the role of Public Sector in India.
2. Discuss the growth of the Private Sector vis--vis the Public Sector. 3. Examine the role of Private Sector in the development of Small Scale Industries.
1. True 4. True
2. True 5.True
3. False 6. False