Public Sector in India

India is a mixed economy where public sector & private sectors coexist. The distribution of Indian Industries in private & public sector has been undergoing changes right from 1951 till today. We have experienced drastic changes in the approaches & policies of our Govt in the development of these two sectors of our country. Three distinct periods could be identified which are characterized by different approaches – i) ii) iii) Pre 1951 period. Period between 1951 to 1991. Period since 1991

At the time of independence, the activities of the public sector were very limited to a restricted field of irrigation, power, railways, ports, communication & some departmental undertakings. There was very limited industrialization, yet the major industries like Jute, Textile and Sugar & Iron & Steel were only in Private Sector & at that time there was insignificant role of the Govt in industrialization of the country. The role of public sector during the period between 1951 to 1991 was highly significant. In 1951 IDR ACT was passed & process of industrialization began. Economic planning facilitated the planned path of industrialization in India. In 1956, ‘ Socialist pattern of society’ as a principle was accepted & huge investment in public sector took place in the course of second & the third plan. The reasons for assigning a crucial role to public sector were as following – i) ii) India needed a strong industrial base & without public sector investment it could not have been possible. India wanted to develop heavy & basic industries for them huge investment was required & private investment was shy, hence it was a must to have dynamic public sector. iii) iv) v) Public sector investment was needed to follow import substitution & export promotion activities. It was possible to create employment opportunities for increasing labour force. Removal of regional balances & control of concentration of economic power also were no less important factors. As a result of the investment in public sector there was growth of industries in public sector. The number of enterprise in public sector increased from 5 to 244 (1951 To 2007), the investment changed from Rs. 29 crores to Rs.4,21,089 crores & the turnover also increased significantly. The PSES play a pivoted role in the production of coal & lignite, petroleum & non – ferrous metals.

iii) iv) Efforts were made to bring all PSUs under Memorandum of Understanding (MOU) The Government set up a Board for Reconstruction of PSEs in 2004.The public sector enterprises experienced a problem of ‘profitability’. In 1991. when India accepted LPG model & introduced new economic policy the role of public sector started getting dilutedi) ii) i) ii) Disinvestment of PSUs. underutilization of capacity etc. Deservation of industries & opening them to private sector. inefficiency. Declaration of Navratnas & providing greater powers to Board of Directors for developing these industries. There were some motivating steps which require a mention – . A separate policy for sick units was designed and public sector sick units was designed and public sector sick units were also brought under the jurisdiction of BIFR. most of them with few exceptions continued to have losses on account of management.

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