RELATIVE SIZE AND

GROWTH OF PUBLIC AND

PRIVATE SECTORS
 CONTENTS
• Introduction
• Public sector
• Objectives
• Size / share
• Growth & Performance

• Private Sector
• Objectives
• Size / Share
• Growth & Performance

• Comparisons: Public v/s Private Sector

Defects
Positive Aspect of Private Sector
Conclusion
 IMPERATIVES OF PUBLIC SECTOR
• Policy has been guided by Industrial resolution 1956 & 1991 (strategic role)
• At independence, country confronted various problems – (needed to be tackled systematically)
o Agrarian economy,
o weak industrial base
o Low level of savings and investment
o No infrastructure
o Extreme poverty
o Low employment
o Regional imbalance

• A big push required – state intervention – no resources, skill and will to undertake
• Pragmatic compulsion to deploy public sector as an instrument for self reliant economic growth to develop
sound agrarian and industrial base.
 PUBLIC SECTOR
Objectives of Public Sector Enterprises:
• To acc. economic growth & industrialization, necessary infrastructure for eco. development,
• To earn ROI & thus generate resources for development,
• To promote redistribution of income and wealth,
• To create employment opportunities,
• To promote balanced regional development,
• To promote import substitution, save and earn foreign exchange for the economy
• Acts as a countervailing force and put up an effective competition to private sector
 REASONS FOR GROWTH OF PUBLIC SECTOR
Phenomenal growth since the commencement of planning and adoption of socialistic pattern

The Industrial Policy Resolution 1948

1. manu. of arms, prod. and control of atomic energy and railways would be monopoly of
central govt. and
2. state would set up undertakings – 6 industries
- Coal
- Iron & steel
- Ship building
- Telephone
- Telegraph and wireless except radio
- Mineral oils
 REASONS FOR GROWTH OF PUBLIC SECTOR
The industrial policy resolution, 1956 enlarged the role of the public sector (public
utility, strategic importance, require large investment have to be in public sector).
• Schedule A to the Resolution enumerated 17 industries for state owned
• Schedule B to the Resolution contained a list of 12 industries

The Industrial Policy of 1956 (basic and restrictive).

So, the Public Sector flourished in the time being before the introduction of new
Industrial Policy of 1991 (Liberal).
GROWTH OF PUBLIC SECTOR UNDERTAKINGS
Period Total Investment (Rs. Cr.) No. of Enterprises
1st Plan (1951 -1956) 29 5
2nd Plan (1956-61) 81 21
3rd Plan (1961-1966) 953 48
3 annual plans (1966-69) 2,410 73
4th Plan (1969-74) 3,902 85
5th Plan (1974-79) 6,237 122
6th Plan (1980-85) 18,225 186
7th Plan (1985-90) 42,811 221
8th Plan (1992-97) 1,18,492 237
9th Plan (1997-2002) 2,01,500 238
10th Plan (2002-07) 3,24,632 240
11th Plan (2007-12) 4,21,089 244
12th Plan (2012-17) 16-17est 11,77,844 244 out of 320; 76 under construction
March, 2019 249 out of 348; 86 under construction, 13
liquidation
PERFORMANCE OF PUBLIC SECTOR UNDERTAKINGS
Indicators of Financial 2008-09 2014-15 2015-16 Change (%)
Performance
Total Investment 5,13,532 18, 66,944 19,68,311 5.43
Total Capital employed 9,10,120 10,95,554 11,71,844 6.96
Total turnover/gross revenue 1,235,060 19, 95,176  19,68,311 7.04 (-)

Profit 1,08,435 1,30,364 1,44,523 10.86

Loss of loss incurring PSEs 15,842 27, 498  28, 756 4.57
Overall net profit - 1,02,866  1,15,767 12.54
Net worth  6,60,245 9,84,409 10,20,737 3.69
Foreign exchange earnings 77,745 1,03,071  77,216 25.08 (-)

Foreign exchange outgo 4,20,415 5,44,561  3,88,045 28.74 (-)

 Employment - 12.91 lakh 12.34 lakh 4.42 (-)
 NEWS
August 17, 2018 - informed during a review meeting of PSEs held under the chairmanship of state CM and
the presence of Finance Minister Capt Abhimanyu

• The turnover of the PSEs in Haryana increased to Rs 57,628 crore in 2016-17 as compared to Rs
49,478 crore in 2014-15 (16.47%).
• The turnover of PSEs made promising improvement in the past over a period of four years
• No. of PSEs under profit increased from 20 in 2014 to 26 on March 31, 2017 whereas
• No. of loss-making public-sector units went down from 24 to 20 over a similar period.
• Also, the loss in quantitative term reduced from Rs 4,247 crore to Rs 1,148 crore during this period.
Source: https://www.moneycontrol.com/news/business/pses-turnover-in-haryana-rises-to-rs-57628-crore-2
853141.html
 SIZE / SHARE OF PUBLIC SECTOR
The performance of public sector has been far from satisfactory
One can speak about the contribution in …….
At Current Prices it accounted for:
• 7.5% of Net Domestic Product (NDP) in 1950-1951,
• 25% of Net Domestic Product (NDP) in 2007-2008.

It also accounts for:

• One-fourth, of Gross Domestic Product (GDP),
• One-third of the Exports

Justifiable ……?
 DEFECTS IN PUBLIC SECTOR ENTERPRISES
Factors responsible for unsatisfactory performance:
• Poor Project management - Cost and time over run
• Land acquisition
• Equipment procurement
• Civil work
• Other imponderables

• Location and Investment decisions

• Delays in filling up top level positions
• Restrictions on functional autonomy
• Lack of Technology Upgradation
• Inadequate attention to R n D
• HRD
• Low rate of return inhibited to regenerate

Lead to becoming a burden rather than asset

 GROWTH OF PUBLIC SECTOR
UNDERTAKINGS

• Till 1990s – public sector was dominant – commanding positions in critical

industries
• Contributed the entire output of steel, lead, copper, aluminum, fertilizers etc.
• However, keeping private sector secondary role had adverse impact on growth
• The new economic policy characterized by
• scope for privatization and
• dereservation of industries
 THE NEW PUBLIC SECTOR POLICY
• Problems, pushed by a need to curb public expenditure, led Govt. to undertake public sector
reforms to revaluate the possibilities for shifting publicly managed activities into the private sector.
• The Industrial Policy announced on 24-04-1991 – no. of industries reserved pruned to Atomic,
minerals, mining, railways….
• The list was further pruned to atomic energy and railways
• Defence production also thrown open for private in 2001 (26% FDI; Currently, 100 per cent
overseas investments are permitted in the defence industry – 49% is allowed under the automatic
route but beyond that, government approval is required.)
• https://timesofindia.indiatimes.com/business/india-business/300-psus-may-shrink-to-barely-two-do
zen/articleshow/80740632.cms
 PRIVATE SECTOR
• Economic inefficiency
• Ineffectiveness

Objectives of Private Sector Enterprises:

• To reduce political interference in the management of enterprise, leading to improved
efficiency & productivity,
• To provide adequate competition to the public sector,
• To generate cash in order to fund the ever-increasing expenses
• Concentrate more on state function
 GROWTH OF PRIVATE SECTOR
UNDERTAKINGS

1957 1971 2000

No. of Companies 29357 30322 542308
Government 74 314 1257
Private 29283 30008 541051
Paid Up capital (RS Crore)
Total 1080 4500 267898
Government companies 70 (6.8%) 2060 (45.8%) 95842 (35.8%)
Private companies 1010 (93.2%) 2440 (54.2%) 172056 (64.2%)
SHARE/SIZE OF PRIVATE SECTOR IN GDP

2013-14 Percentage of GDP In RS Crore

Public 19.7 20,60,276

Private 35.3 37,02,271

Unorganized 45 47,14,592

GDP 100 1,04,77,139

 PERFORMANCE OF PRIVATE SECTOR
UNDERTAKINGS

2001-02 2009-10

Share in the net sales of manufacturing and Private sector 48.83% 68.55%
services industry
Public sector 51.17 % 31.45 %

Share in the net profit in non-agriculture Private sector 39.17 63.86

economy

Public sector 60.83 36.14

 REASONS FOR GROWTH OF PRIVATE
SECTOR
• largely due to the higher FDI over the last decade.
• Financial Reforms,
• Usage of more advanced technology,
• Divestiture, withdrawal, liquidation, lease (pvt. of management),
 DEFECTS OF PRIVATIZATION

• Emergence of monopoly power and concentration,

• Industrial Disputes
• Industrial Sickness
• Change
POSITIVE EFFECTS OF THE GROWTH OF PRIVATE
IN INDIA
• Manufacturing registered 11.9% growth & passenger vehicles sector grew by 11.61% during April-May 2007.
• Electricity, gas & water supply performed well and recorded an impressive growth rate of 8.3%.
• Construction growth rate rose to 10.7%.
• Trade, hotels, transport and communication registered a growth rate of 12%.
• Exports grew by 18.11% during the 1st quarter of 2007-2008 and the imports shoot up by 34.30% during the same period.
• The Indian food market is currently valued at US$ 1.3 billion and is growing at a CAGR of 20 per cent. 
• India's organic food market is expected to increase by three times by 2020 & The online food ordering business in
India is in its nascent stage but witnessing exponential growth.
• Financing, insurance, real estate and business services recorded an impressive growth rate of at 11% during the 1st quarter
of this fiscal.
 NEWS

• https://economictimes.indiatimes.com/news/economy/policy/number-of-registered-companies-cli
mbs-to-15-27-lakh-in-january/articleshow/51026331.cms
• https://www.livemint.com/Companies/lGVvnEx48PyMBTF2g37ALM/Over-onethird-of-Indias-
17-million-registered-companies-s.html
• https://www.livemint.com/Companies/S7Ri5aQEAMIaiikRpMYRNI/Only-66-of-registered-com
panies-in-India-are-active-Govt-d.html