Growth Of Industry In India

Roles Played by Public Sector in Indian Economy

Also, a high level of hotel construction is under way in Cuba, mostly in association with Western European consortia. Entrepreneurs create new businesses, taking on all the risks and rewards of the company. A company is a legal entity formed by a group of people to engage in business. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

These awards are also an expression of commitment of the policy makers to the MoU system. While excellent performing PEs are awarded with the MoU Awards with Trophies and Excellence Merit Certificates, the remaining excellent performing PEs are recognized with Excellence Merit Certificates. The power to incur capital expenditure on new projects, moder­nization, purchase of equipment, etc., without Government approval upto Rs. 250 crore or equal to 50% of the net worth, whichever is less.

India is in a strong position to do this since it has a history of using English for communication, which in turn supports global trade and finance. To address poverty there is a need to move people from bad sectors to good sectors or from unemployment to employment. This is happening with growth in human skills intensive sectors such as hotels, restaurants and IT, but there are geographical, labour unions and human skills restrictions on labour movement. Whereas the prices of other products are affected by speculative or strategic offers, this is generally not the case with tourism. It is therefore a sector that tends to improve the terms of trade of an economy in the medium as well as the short term.

The Role Of Government In The Economy

It considers questions such as whether Biden will be softer on China and whether he would take a more conciliatory approach towards the latter in the area of trade? Madan also Roles Played by Public Sector in Indian Economy offers insights into whether a Biden presidency might take a more conciliatory view on H1-B visas and ease up on Iran sanctions in ways that might be beneficial to India.

These things have forced the Government to intervene in the economic activities through a planned dispersal of industries, which will ensure balanced regional growth of the country. It is only through the state the development of relatively backward areas can be affected. Since the 1990s there has been significant economic growth and expansion in India, this has had an effect on how women operate in the workforce there. Women’s labor force participation has fallen from 37% in 2004–2005 to 27% in 2009–2019.

Formation Of Capital:

By the mid-1990s, the number of sectors reserved for public ownership was slashed, and private-sector investment was encouraged in areas such as energy, steel, oil refining and exploration, road building, air transportation, and telecommunications. An area still closed to the private sector in the mid-1990s was defense industry. Foreign-exchange regulations were liberalized, foreign investment was encouraged, and import regulations were simplified.

  • State participation in commerce and industry is an important instrument of attaining the objective of serving as model employer.
  • Therefore, these enterprises can be used as potent means of economic and social change.
  • After the adoption of this new policy in 1991, there has been phases of growth followed by slowdown in the industrial development process.
  • Our mission is to provide an online platform to help students to discuss anything and everything about Economics.
  • Industry or the secondary sector of the economy is another important area of economic activity.
  • To undertake these massive developments, PEs was created as separate corporations or companies so that these organisations could be kept away from government procedures and run on commercial lines.

Presently, only Indian Oil, ONGC, SAIL and NTPC have been declared as Maha Navratna. But only NTPC will be able to exercise the authority since the other companies are not having the requisite number of independent directors in their boards. These companies shall be allowed to take decisions on projects independently of Government values up to Rs. 5,000 crores. Public sector is considered a powerful engine of economic development and an important instrument of self-reliance. They provide infrastructural facilities to provide an investment base to private entrepreneurs.


The public sector is a component of the economy that includes all levels of government as well as government-controlled businesses. The word “public sector” is also used to describe a comparison between the commercial sector and the third, or voluntary, sector. This makes it possible to map the scope of government activity inside the larger economy. The public sector helps a country’s economic development in more ways than one, through its health and education services, which contributes significantly to the Human Development Index.

Roles Played by Public Sector in Indian Economy

The licensing system imposed additional restrictions on the activities of large firms, curtailing their growth. Under a policy that was one of a kind, consumer goods such as apparel, footwear, furniture, sporting goods, office supplies, leather goods, and kitchen appliances were reserved by law for production by small firms. Foreign firms were asked to dilute their ownership stake in their Indian subsidiaries and in response, multinationals such as IBM and Coca-Cola closed their operations and left the country. Health and education are privatised at a huge scale and have become inaccessible for the working class. Funding for health and education in India is minimal compared to other poor countries. During the COVID-19 pandemic, the vast majority of the population in India had to depend on the private sector due to a lack of adequate public health infrastructure. The private healthcare sector is in a far-worse state, and is highly expensive.

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As the training for employees is not directly related with consideration, the PEs employees do not take any interest in acquisition of training facilities. In general, these are large scale enterprises requiring appropriate organizational structure, with particularization of functions and delegation of authority . With a view to bring about unity of purpose, moreover, there is always the need for co-ordination. These Government companies are, moreover, registered with the Registrar of Companies under the Companies Act, 1956. Some PEs, such as, National Film Development Corporation, National Research Development Corporation, National Small Industries Corporation Ltd., Jute Corporation of India Ltd. and Handicrafts & Handloom Export Corporation India Ltd. etc., are, however, ‘promotional’ in nature. Huge Collection of Essays, Research Papers and Articles on Business Management shared by visitors and users like you. In addition, such units were given certain concessions such as tax benefits and electricity at a lower tariff.

  • The efforts at price controls generally failed while consuming much public and private attention.
  • Employment is offered at a low daily wage, usually paid in grain, the rationale being that only the truly needy will take jobs at such low pay.
  • The public sector is a component of the economy that includes all levels of government as well as government-controlled businesses.
  • Foreign firms were asked to dilute their ownership stake in their Indian subsidiaries and in response, multinationals such as IBM and Coca-Cola closed their operations and left the country.
  • The activities of National Small Industries Corporations are related to promotion of SSI units.
  • In the private corporate sector too, firms are financially weak and over‐leveraged (Sengupta & Vardhan, 2019).

Foreign exchange became one of the items the government had to resort to rationing. Several new factories lay idle for want of foreign exchange to import some necessary inputs, while others hoarded foreign exchange to starve their competitors or earn a premium in the black market. Holding foreign exchange without a license became an offense punishable by jail time. Ultimately, the rupee had to be devalued, which generated further disruptions in the economic lives of most people. The expenditures necessitated by the massive investments in SOEs generated new problems. One government method for financing expenditures was the creation of new money, which resulted in significant inflation. The government feared the political backlash that the rising prices could generate.

Role Of Public Sector In The Growth Of Indian Economy

Any business or corporate entity operating in that country must operate under the laws. In most free economies, the private sector makes up a big portion of the economy, as opposed to nations that have more state control over their economies, which have a larger public sector. For example, the United States has a strong private sector because it has a free economy, while China, where the state controls many of its corporations, has a larger public sector. The private sector tends to make up a larger share of the economy in free market, capitalist based societies. Agriculture and allied activities are not a homogenous group of activities, in fact, an umbrella of different activities having their different dynamics each. So, the impact of COVID‐19 on this sector varies according to the set of activities, that is, on crops, livestock, fisheries, and so forth.

[Moreover, 60% of the PRP will be given with the ceiling of 3% of Profit Before Tax and 40% of the PRP will come from 10% of incremental profit. Further, the PRP has been linked to the performance of the individual executives, which will be based on a robust and transparent Performance Manage­ment System].

  • The third category consisted of the remaining industries which were to be in the private sector.
  • The latest report by the IIFL Huran rich list says that the wealth of Gautam Adani jumped to Rs. 5.1 lakh-crore , only second to Mukesh Ambani (Rs. 7,18,000 crore) among Indians.
  • In the 1980s, this trend was reversed and investment in industries was increased by making the infrastructure base such as power, coal, rail much stronger.
  • During the Internet bubble that led up to 2000, heavy investments in undersea fibre-optic cables linked Asia with the rest of the world.
  • They argue that the decline in growth is largely due to COVID-19 and also highlight that we need not be pessimistic about India’s growth prospects after the pandemic.

The crisis undermined the government’s claim that its strategy of prioritizing industry over agriculture for public investment would increase national self-reliance. The particular nature of the chosen strategy of development can be understood by comparing it to the alternative strategies that could have been adopted. One such strategy would have been to prioritize public investments in not industry but agriculture, which was the source of livelihood for more than three-fourths of its people.

Private Sector

Public enterprises have minimised to a large extent the need for imports by producing better substitutes of products within the country. These enterprises also earn significant amount of foreign exchange through exports. Owing to their big size, they are able to reap the benefits of large-scale operations. They help cutting down wasteful completion and ensure full use of installed capacity. Finally, optimum utilisation of resources results in better and cheaper production. A few public utilities like Doordarshan, Akashavani, Road Transport Corporations, State Electricity Boards, Railways, Post and Telegraphs etc. are providing services to general public.

Roles Played by Public Sector in Indian Economy

The discourse on the efficacy of the Nehru-Mahalanobis Strategy is commonly contested by economists. A criticism of the approach emphasizes the lack of resource allocation in the agriculture sector. It is argued that the misbalanced weightage towards the machine-making sector contributed to the increase in food-grain prices and thus, perpetuated poverty and malnutrition. Defenders of the strategy claim that it sought to increase agricultural output by increasing the output-capital ratio. This agreeably would have been accomplished through land-reforms, something the strategy did not address, not indicating a problem with the strategy itself. India’s GDP growth during January–March period of 2015 was at 7.5% compared to China’s 7%, making it the fastest growing MAJOR economy.

Public Sector Enterprises In India: Nature, Role, Types, Importance, Criticism And Problems

Their strategy of increasing agricultural production was based on plans to reform agrarian institutions. According to the thinking of the planners, the poor performance of Indian agriculture was due to the fact that tillers did not own the land they worked, so they had little incentive to make land improvements that would increase long-term productivity. The government planned to implement legislation to redistribute land from large landlords to actual tillers and improve the terms under which tenant cultivators leased land from the landowners.

Import needs depend on the level of development and the degree of diversification of a country’s economy. These needs are also dependent on the availability of substitutes for imported products and on the qualitative level of the tourist supply in each country.

Role Of Private Sector

All the economic activities however now been provided some relaxations after a complete halt on them but an unprecedented loss has already occurred and the economy is shaken badly. The push for land redistribution ran into political opposition and clashed with the requirements of due process, so as little as 5 percent of the land was actually redistributed. The creation of agricultural cooperatives also did not materialize due to difficulties of organization and lack of enthusiasm on the ground. Agricultural production barely kept pace with population growth, and the country’s food security remained precarious. The drawback of prioritizing industry over agriculture for public investments became glaringly apparent when the country experienced a food crisis in the mid-1960s, necessitating urgent large-scale imports of subsidized grain from the United States.

Virgin Islands, and Puerto Rico, which recorded growth rates averaging 4.2 percent. On the other hand, very large increases were registered in Aruba, Bonaire, The Cayman Islands, Dominica, Jamaica, and St. Kitts and Nevis. The individual performance of these destinations in terms of cruise-passenger visits was impressive, recording rises of over 25 percent. The public sector has the benefit of the people above everything because its purpose is not to earn money but to benefit the people at all costs. The public sector provides many essential things at quite a reasonable cost which the private can not provide. To contain the spread of COVID‐19, just like how other countries did, India imposed a complete lockdown in march which coincided with the peak of harvesting season of Rabi crops in India mainly in the north‐west which posed significant losses to the farmers. Although there were relaxations to the agriculture sector during lockdown but transport constraints, mobility restrictions and lack of labor due to reverse‐migration of labor to their native places were the major problems faced by the farmers.

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