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Essay on “Role of Public Sector in The Indian Economy” Complete Essay for Class 10, Class 12 and Graduation and other classes.


Role of Public Sector in The Indian Economy


Indian Economy 

The modern concept of a welfare state throws heavy responsibility on the shoulders of the democratic government for boosting up nor only the trade within the country but also our export potential. India has been wedded to the policy of democratic socialism. So we have been discouraging, to a great extent private enterprise though it is not completely eliminated from Indian economy. Before the attainment of independence public sector was limited to Railways, Post and Telegraph, Ordnance and Aircraft factories, etc. After independence, as a matter of policy public sector is given greater importance. Industrial policy resolution states “the State will progressively assume predominant and direct responsibility for setting up new industrial undertakings…..”. The need for the public sector arose because of various reasons immediately after independence. One of the most important reason is to ensure rapid growth of the economy. It is only through the public enterprises that economic uplift of the country is possible.

In fact economically India had been a backward country and in this world of fast development it is not possible to waste a lot of time in becoming economically strong. Consequently, the pace of economic development was to be increased if we were to compete with the more industrialized societies of the world. The target for increasing the national income of India can be achieved with the help of the public sector.

Another reason for expanding the public sector is to remove the regional disparities. As the public sectors are to be set up in the different regions of the country that will help the growth of economy in all the regions. For the performance of economic development public sector can also provide funds. The profit of the Government enterprises can be again invested either in development plans or in some other domains. For example HMT has been able to set up so many industries by reinvesting its profits. As has already been pointed out the most important reason of encouraging the establishment of public sectors is to conform to the professed socialistic pattern of the society. This pattern of society has been kept as one of the objectives in the Directive Principles of State Policy. So the Five Year Plans have taken up this as the major objective of planning. Moreover, in the public sectors the expansion lies in the pattern of resource allocation. In the First Plan agriculture was given greater importance whereas in the Second Plan industries were given more prominence. As a result of it, it was necessary that public sector will definitely increase and utilize the resource allocation in a proper manner.

Organisationally there are four types of public sector enterprises, that is those which are departmentally managed, those which are managed by independent boards, and those which are organized as public enterprises and lastly those which run as banks. In India the non-departmental industrial and commercial enterprises were divided into: (1) under construction; (2) running concerns; () promotional and developmental concerns; and (4) financial institutions. All of them play an important role in the development of our economy. We find that the share of the Government enterprises is steadily increasing though, as compared to the private sector, it is still low. In some important sector like agriculture, State enterprise has no role to play but the Government is taking industries of national importance under its ownership. The banks have been nationalized and the General Insurance companies have also been brought under social control.

Public sector has an important role to play in capital formation. It also helps in the flow of goods and services in the economy. The increase in the production of the goods is going to have salutary effect upon our economy. Apart from it public sector has also been able to create an infrastructure like transportation, communications, and power development. The production of these types of capital goods involves heavy investment and gives low yield. These types of enterprises can be taken up only by the public sector thereby making the industrial base quite strong. During the three plans, it was quite clear to the Government that the private sector is suffering from certain handicaps and quicker industrial development was not possible. For making the Indian economy self-generating, the development of industries was to be diversified. The Government had to enter this field in order to prepare a proper type of industrial base and the public sector played an important role in this respect. Another important contribution of the public sector is the export promotion. The State Trading Corporation, and the Minerals and Metals Trading Corporation have been able to promote exports specially in the East European Countries. Similarly Indian handicrafts, and light engineering goods have become popular in many countries. In other words, it would never have been possible had the industries been in the hands of the private sector. Lastly public sector has also made important substitutions possible. Hindustan Antibiotics Limited and the Indian Drugs and Pharmaceuticals Limited have started producing drugs which were previously monopolized by the foreign concerns. Similarly, ONGC and Indian Oil Corporation have tried to make India self-reliant in oil production. It will not be incorrect if we are to say that it is because of the failure of the public enterprises that imports have been on the increase. In the case of the public sector even the pricing policy can be favourable to the people in general. In the Private Sector the prices are determined by investment and expenditure but in public sector some of the goods may be sold at subsidised rates.

Most of the Public Sector undertakings yielded profit. This enabled the Government to take policy decision against rendering any budgetary support to the working capital requirement of such units, which are to fend for themselves on a strictly commercial basis through the financial institutions. This will induce a measure of responsibility in the financial management.

It has been pointed out by some of the economics like Dr. K.N. Raj that the performance of the public enterprises has not been very encouraging. He says that the financial structure of some of the public sector organizations in India is such as to make these public sectors losing concerns. In fact because of the lack of ethical values among the labourers and workers it has not been possible to raise the standard of the public sector upto the expectations. Nationalised industries generally degenerate because the workers have security of service and develop indifference towards their work. In other words public sector is inefficient but that is not an inherent defect of public enterprises. Private sector will never be able to rise upto the demands of the welfare states because the moment it becomes a losing concern the industry owners lose interest. So the future of the public sector in India cannot be under-estimated. If we are to become Democratic Socialist Republic we will have to give greater importance to public sector and we will have to give greater importance to public sector and we will have to rely upon public sector for a number of years to come, for the development of economy.


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