BUSINESS ENVIRONMENT

1ST Assignment on Comparative study on the role of Public sector and Private sector in the Economy of India

Submitted By 1st year, M A!PT" #ibrugarh $niversity

Comparative study on the role of Public sector and Private sector in the Economy of India
The present economic structure of Indian economy is known as mixed economy, where there is co-existence of both the Public sector and the Private sector. All the different type of industries is divided between these two sectors. Some industries are owned and mana ed by the state throu h its public sector and the remainin others are owned and mana ed by the private sector of the country. In India, only those industries are reserved for the public sector which is essential for the speedy development of the economy and where private sector is reluctant to invest either due to low rate of return or heavy risk involved in it. The new Industrial !olicy, "##" radically liberalised the industrial policy itself and unshakled both the two industrial sector from the cobwebs of unnecessary bureaucratic controls and introduced liberalisation measures in order to inte rate Indian economy with the $orld economy, liberated the indi enous private sector enterprise from the restrictions of %&T! '%onopolies and &estrictive Trade !olicies( Act so as to attain sustained rowth in productivity and employment and also to achieve international competitiveness. India bein a mixed economy, adopted a middle course where it has )udicially mixed both the !ublic sector and !rivate sector for their respective role in development activities of the country. *rom the very be innin after independence !ublic sector has been playin an important role in shapin the basic structure of economy. !ublic sector at present constitute a ma)or national capability in terms of their scale of operations, covera e of the national economy, technolo ical capabilities and stock of human capital. In comparison to !ublic sector, !rivate sector has been playin a dynamic role in introducin new products, new varieties, new processes, new desi ns etc. thereby update the entire production system and plays a specific role for conductin the development activities of the country.

The followin

table shows the comparison of different roles played by the !ublic

sector and !rivate sector in the Indian economy. %oles +mployment ,eneration Public Sector !ublic sector is also playin an important role Private Sector !rivate sector of total in

is

ma)or is

in employment

enerator. -early workforce !rivate sector. hu e more

eneratin employment in the #3/

country. -early ./ of the en a ed !ublic sector. #1/ are

total workforce is en a ed in Thus, even after makin en a ed in sector and completin 41

0ut of these volume of investment in public years of plannin ,

unor ani2ed sector and "1/ than

are en a ed in or ani2ed Indian economy is still broadly 5ontribution to -et 6omestic !roduct '-6!( sector. based on !rivate sector Inspite of hu e investment the The private sector share in -et public sector enterprise 6omestic !roduct was .3/ in contributes a little portion of "##1-#". So we can determine the -et 6omestic !roduct of that the role of private sector is the country. Althou h the rate 9uite dominant in a riculture of rowth of investment in and allied activities, small scale public sector enterprise is industry, retail trade etc. very hi h 'i.e. "4/ to 7"/( but the share of !ublic sector enterprise in -6! was "8.8/ in "##1-#"'excludin public administration and defence(. 0verall share in -6! is 7./ 5apital *ormation in "##1-#". The share of public sector in The ross domestic formation has increased from 3.:/ durin "7."/ durin comparative shares of

capital public and private sectors in the ross capital formation of the

the first plan to country also recorded a chan e the seventh from 33.4. to 8..:3. !rivate

plan. !ublic sector contributes sector contributes about .#/ of about Infrastructure 7"/ of nation;s the nation;s savin s. ma)or of !ublic areas sector of and a savin s. !ublic sector investment on Before infrastructure power, heavy trainin way leadin communication, education for and sector basic transportation, hand industries,

like infrastructural sector lies in the and !rivate sector was playin

irri ation, dominant role in respect of road technical transport, water transport etc. and "##" private sector has been participatin in new overall areas like power eneration, air

etc. has paved the 0nly after new industrial policy, a ricultural to development actively

industrial

development of the economy transport, buildin hi hways and as a whole. !rivate sector are brid es etc. also dependin on these infrastructural Industrial development facilities

developed by !ublic sector !ublic sector is havin a !rivate sector industry is playin ma)or hold in heavy, basic a responsible role in Indian and strate ic industries which economy where it set up and is reserved for public sector expanded and essential for cotton and )ute speedy textiles, su ar, paper, edible oil, reservation on some

development of the economy. tea etc. After industrial policy, The industrial base of the "##" stren thened with economy is now considerably industries were removed and the !rivate sector is also investin development of public sector in lar e scale industries like industries in various fields like !etrochemicals, Iron < steel iron < steel, coal, heavy and machinery, petroleum industries producin en ineerin , heavy electrical intermediate oods like machine < tools, electronics and electrical

natural

as,

fertili2ers,

oods. In this way the private

chemicals, dru s etc. The sector industry is contributin a development of private sector lot to the economy of the industries is also dependin Tradin country. on these industries. !ublic sector is not dominant !rivate sector is dominatin in the tradin activities of the over the entire tradin sector of country. or anisation !ublic like sector the country. Both the retail and *ood wholesale trade in India are in has introduced

5orporation of India '*5I( has the hands of private sector. introduced a hu e network of ,overnment participate in the tradin interest of the consumer. !ublic distribution system to various control and re ulatory of measures to control price of movement stora e and etc. of to oods control +xport !romotion and Import substitution and essential commodities for the commodities,

hoardin

black

marketin of commodities. !ublic sector enterprise has !rivate sector enterprise has been contributin a lot for the started contributin to promotion promotion of exports. The of forei n exchan e earnin exports in the field of of Information Technolo y, *our

the public enterprise rose wheelers, A ricultural products, from :,=3" crore in "#=8-=: small scale and cotta e industry to &s."1,38: crore in "##7- etc. #3. >A? achievin forei n 5ontribution to !ublic sector enterprise etc. has records shown in like B>+?, B+?, I05, 0-,5, creditable

import substitution exchan e of the

and thereby saved precious country !ublic sector enterprise are !rivate sector enterprise are

central exche9uer

contributin a ood amount of also contributin resources to the

to the central

central exche9uer re ularly in the form

exche9uer re ularly in the of dividend, excise duty, custom form of dividend, excise duty, duty, corporate taxes etc. custom duty, corporate taxes etc. 6urin the Sixth plan the contribution enterprise to of the !ublic central

exche9uer was to the tune of &emoval of re ional disparities &s.7.,:.1 crore. !ublic sector is playin re ional installin disparities a !rivate sector are hesitant in and disparities because they are ood performance

dominant role in removin the these role of removin re ional various units in the interested in

backward states like Bihar, and more profitability. 0rissa, %adhya !radesh etc. These may lead to poor performance but there is an all A riculture round development of and 5ompletely India owned is and not economy of the country. 5ompletely owned

mana ed by !rivate sector.

mana ed by !rivate sector. In a riculture conducted on commercial basis rather it is mana ed by the households. A riculture and other allied activities like animal husbandry, dairyin , poultry etc. are playin a dominant role as it contributes nearly 31/ of ,6! and it provides employment to nearly 4./ of the total workin

Small scale and 5otta e Industry

5ompletely

owned

population. and 5ompletely mana ed Small industries development These by are scale

owned !rivate and playin the

and sector. cotta e an

mana ed by !rivate sector.

important role in the industrial of country mostly industries are local

labour intensive in nature and enerate employment opportunities. In "##8-#: these industries numberin 7:.." lakh units the enerated employment to extent of "84.: crore lakh, worth and output

produced &s.7,#3,##1

contributed nearly 38/ of the total exports of the country.

Submitted By

1st year, M A!PT" #ibrugarh $niversity