Definition, History, objectives of Public Sector

Definition of Public Sector

The sector, which is engaged in the activities of providing government goods and services to the general public is known as Public Sector. The enterprises, agencies, and bodies are fully owned, controlled and run by the government whether it is central government, state government or a local government.

History of public Sector

When India achieved independence in 1947, it was primarily an agricultural country with a weak industrial base. There were only eighteen Indian Ordnance Factories in the country which the British had established for their own economic interest and rule the subcontinent with brute force. The national consensus was in favour of rapid industrialisation of the economy which was seen as the key to economic development, improving living standards and economic sovereignty.

Building upon the Bombay Plan (1940), which noted the requirement of government intervention and regulation, the first Industrial Policy Resolution announced in 1948 laid down broad contours of the strategy of industrial development. Subsequently, the Planning Commission was formed by a cabinet resolution in March 1950 and the Industrial Act was enacted in 1951 with the objective of empowering the government to take necessary steps to regulate industrial development.

Prime Minister Jawaharlal Nehru promoted an economic policy based on import substitution industrialisation and advocated a mixed economic system. He believed that the establishment of basic and heavy industry was fundamental to the development and modernisation of the Indian economy. India's second five year plan (1956–60) and the Industrial Policy Resolution of 1956 emphasised the development of public sector enterprises to meet Nehru's national industrialisation policy. His vision was carried forward by Dr. V. Krishnamurthy known as the "Father of Public sector undertakings in India". Indian statistician Prof. P.C. Mahalanobis was instrumental to its formulation, which was subsequently termed the Friedman– Mahalanobis model.

The 1991 industrial policy was radically different from all the earlier policies where the government was deliberating disinvestment of public sector and allowing greater freedom to the private sector. At the same time, foreign direct investment was invited from business houses outside india. Thus, multinational corporations, which operate in more than one country gained entry into the Indian economy. Thus, we have public sector units, private sector enterprises and multinational corporations coexisting in the Indian economy.

The objectives of Public Sector

* To promote rapid economic development through creation and expansion of infrastructure

* To generate financial resources for development

* To promote redistribution of income and wealth

* To create employment opportunities

* To promote balanced regional growth

* To encourage the development of small-scale and ancillary industries, and

* To accelerate export promotion and import substitution