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    Public Sectors in Indian Economy: Objectives, Importance, Performance and Problems

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    Pradumna Kasaudhan
    The document discusses the objectives, importance, performance, and problems of public sectors in the Indian economy. It notes that public sectors were established post-independence to promote self-reliant growth but faced issues like inefficiency. While public sectors helped generate employment and investment, contributed to the exchequer, and promoted balanced regional development, they struggled with problems like poor policymaking, overstaffing, and high costs. Economic reforms in 1991 opened sectors to private players and increased privatization of public sectors.

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    Public Sectors in Indian Economy: Objectives, Importance, Performance and Problems

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    Pradumna Kasaudhan
    35 views4 pages
    The document discusses the objectives, importance, performance, and problems of public sectors in the Indian economy. It notes that public sectors were established post-independence to promote self-reliant growth but faced issues like inefficiency. While public sectors helped generate employment and investment, contributed to the exchequer, and promoted balanced regional development, they struggled with problems like poor policymaking, overstaffing, and high costs. Economic reforms in 1991 opened sectors to private players and increased privatization of public sectors.

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    The document discusses the objectives, importance, performance, and problems of public sectors in the Indian economy. It notes that public sectors were established post-independence to promote self-reliant growth but faced issues like inefficiency. While public sectors helped generate employment and investment, contributed to the exchequer, and promoted balanced regional development, they struggled with problems like poor policymaking, overstaffing, and high costs. Economic reforms in 1991 opened sectors to private players and increased privatization of public sectors.

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    35 views4 pages

    Public Sectors in Indian Economy: Objectives, Importance, Performance and Problems

    Uploaded by

    Pradumna Kasaudhan
    The document discusses the objectives, importance, performance, and problems of public sectors in the Indian economy. It notes that public sectors were established post-independence to promote self-reliant growth but faced issues like inefficiency. While public sectors helped generate employment and investment, contributed to the exchequer, and promoted balanced regional development, they struggled with problems like poor policymaking, overstaffing, and high costs. Economic reforms in 1991 opened sectors to private players and increased privatization of public sectors.

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    12/4/2019 Public Sectors in Indian Economy: Objectives, Importance, Performance and Problems

    Public Sectors in Indian Economy: Objectives, Importance,


    Performance and Problems
    In India, a public sector company is that company in which the Union Government or State
    Government or any Territorial Government owns a share of 51 % or more. Currently there
    are just three sectors left reserved only for the government i.e. Railways, Atomic energy
    and explosive material.
    HEMANT SINGH
    NOV 25, 2015 11:58 IST

    In India, a public sector company is that company in which the Union Government or
    State Government or any Territorial Government owns a share of 51 % or more.
    Currently there are just three sectors left reserved only for the government i.e.
    Railways, Atomic energy and explosive material. Private sectors/players are not allowed
    to operate in these sectors.

    Before the independence of India, there were only a few public sector companies in the
    country this includes, Indian Railways, the Port Trusts, the Posts and Telegraphs, All
    India Radio and the Ordinance Factory are some of the major examples of the country’s
    public sector enterprises. However, post Indian independence, some policies for the
    development of the socio-economic status of the country were planned out by the then
    visionary leaders, where the public sector were used as a tool for the self-reliant growth
    of the nation’s economy.

    This was the reason that the second five year plan of India was solely based on the
    development of the different industries. Till 1990s major sectors of the economy were
    reserved only for the government, this caused the great loss of our precious natural
    resources and the whole country trapped into the great economic problem. From the
    very first five year plan till 1980s our country grows with the average rate of 3.5% per
    year (which is called Hindu rate of growth by Prof. Rajkrishna).

    But later on the in 1991, july our new economic policy was launched under the
    leadership of Mr. Manmohan Singh and P.V. Narsimha Rao.

    The main objectives of this new economic policy were:

    1. To maintain a sustained growth in productivity

    2. To enhance gainful employment

    3. To achieve optimum utilization of human resources


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    12/4/2019 Public Sectors in Indian Economy: Objectives, Importance, Performance and Problems

    4. To transform India into a major partner and player in the global arena.

    5. To take out Indian economy from the vicious circle of poverty.

    6. Open the Indian economy to interact openly with the rest of the world.

    The main result of this new policy was that reserved sectors were opened for the private
    players. Public sectors were not able to operate at its optimum pace.

    Objectives: The public sector aims at achieving the following objectives:

    To promote rapid economic development through creation and expansion of


    infrastructure

    • To generate financial resources for development

    • To promote redistribution of income and wealth

    • To create employment opportunities

    • To promote balanced regional growth

    • To encourage the development of small-scale and ancillary industries, and

    • To accelerate export promotion and import substitution

    Role of public sectors in the development of the country is explained below:

    • Public Sector and Capital Formation: The role of public sector in collecting saving
    and investing them during the planning ear has been very important. During the first
    and second five year plan it was 54% of the total investment, which declined to 24.6 %
    in the 2010-11.

    • Employment Generation: Public sector has created millions of jobs to tackle the
    unemployment problem in the country. The number of persons employed in the as on
    march 2011 was 150 lakh. Public sector has also contributed a lot towards the
    improvement of working and living conditions of workers by serving as a model
    employer.

    • Balanced Regional Development: Public sector undertakings have located their


    plants in backward parts of the county. These areas lacked basic industrial and civic
    facilities like electricity, water supply, township and manpower. Public enterprises have
    developed these facilities thereby bringing about complete transformation in the socio-
    economic life of the people in these regions. Steel plants of Bhilai, Rourkela and
    Durgapur; fertilizer factory at Sindri, are few examples of the development of backward
    regions by the public sector.

    • Contribution to Public Exchequer: Apart from generation of internal resources and


    payment of dividend, public enterprises have been making substantial contribution to
    the Government exchequer through payment of corporate taxes, excise duty, custom
    duty etc. gross internal resource generation in 1990- 2000 was 36000 cr which rose to
    1, 11,000 cr in 2008-09, while net profit was 92,077 cr in 2010-11.

    • Export Promotion and Foreign Exchange Earnings: Some public enterprises have
    done much to promote India’s export. The State Trading Corporation (STC), the Minerals
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    12/4/2019 Public Sectors in Indian Economy: Objectives, Importance, Performance and Problems

    and Metals Trading Corporation (MMTC), Hindustan Steel Ltd., the Bharat Electronics
    Ltd., the Hindustan Machine Tools, etc., have done very well in export promotion.

    • Import Substitution: Some public sector enterprises were started specifically to


    produce goods which were formerly imported and thus to save foreign exchange. The
    Hindustan Antibiotics Ltd., the Indian Drugs and Pharmaceuticals Ltd. (IDPL), the Oil and
    Natural Gas Commission (ONGC), the Indian Oil Corporation Ltd., the Bharat Electronics
    Ltd., etc., have saved foreign exchange by way of import substitution.

    • Promotion of Research and Development: As most of the public enterprises are


    engaged in high technology and heavy industries, they have undertaken research and
    development programmes in a big way. Public sector has laid strong and wide base for
    self-reliance in the field of technical know-how, maintenance and operation of
    sophisticated industrial plants, machinery and equipment in the country. Expenditure on
    research and development reduces the cost of production.

    Performance of Central Public Sector Undertakings

    There were altogether 248 CPSEs under the administrative control of various
    ministries/departments as on 31 March 2011. Out of these, 220 were in operation and
    28 were under construction. The share of cumulative investment (paid-up capital plus
    long-term loans) in all the CPSEs stood at Rs. 6,66,848 crore as on 31 March 2011
    ,showing an increase of 14.8 per cent over 2009-10. The share of manufacturing in
    gross block, during 2010-11, was 27.8 per cent. The share of mining, electricity, and
    services in total investment, in terms of gross block, was 23.0 per cent, 25.2 per cent,
    and 23.2 per cent respectively. The net profit of (158) profit-making CPSEs stood at Rs.
    1,13,770 crore in 2010-11. The net loss of (62) loss-making enterprises, on the other
    hand, stood at Rs. 21,693 crore during the same period. The year also witnessed severe
    financial 'under-recoveries' by public-sector oil marketing companies (OMCs) as they had
    to keep the prices of petroleum products low in the domestic market despite high input
    prices of crude oil.

    Problems of Public Sectors:

    • Poor policy making and its execution

    • Over staffing

    • Wastage of resources or under utilization of resources

    • Higher operating cost

    • Lack of motivation for self improvement

    • Lack of proper price policy

    List of Navratna companies in India:

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    12/4/2019 Public Sectors in Indian Economy: Objectives, Importance, Performance and Problems

    Conclusion:

    The expansion of the public sector was aimed at the fulfillment of our national goals,
    that is., the removal of poverty, the attainment of self-reliance, reduction in inequalities
    of income, expansion of employment opportunities, removal of regional imbalances,
    acceleration of the pace of agricultural and industrial development, to reduce
    concentration of ownership and prevent growth of monopolistic tendencies by acting as
    effective countervailing power to the private sector, to make the country self-reliant in
    modern technology and create professional, technological and managerial cadres so as
    to ultimately rid the country from dependence on foreign aid. But these motives could
    not be achieved up to the desired extent. That is why government is on the spree of
    privatization of these enterprises.

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