Significance of Public Sector
The pattern of industrial growth depends on the relative roles of private and public sector. Public sector means the part of the economy that is publicly owned as distinct from those owned by private individuals or firms. It has a number of absolutely essential functions.
By employing productive resources, the public sector provides most of the public goods, like primary education, public health, drinking water, social services, child nutrition, women and labour welfare, social security, sanitation, poverty eradication, road, defence, etc. All of them will facilitate the overall development of the economy and people.
As privately owned organizations or firms will not provide these public goods, the public sector has to assume such responsibility. Thus, the mixed economy consisting both the private sector and public sector, has been the feature of many modern states.
The post-Independent Indian State assumed a greater role in the reconstruction of the country that includes regulation, facilitation and welfare promotion. To meet these requirements, the Indian State adopted the public sector dominated, heavy industry based import substituting development planning over five decades since independence.
Public sector is playing a significant role in terms of its contribution to GDP in many developed as well as developing countries.
Much of the developing world in the early 1950s adopted an inward oriented strategy of industrialization guided by the objective of self-reliance and a philosophy of economic nationalism. The promotion of public sector through development planning is basically used to direct the resources towards optimum utilization and equitable distribution.
India too adopted similar development strategy of expanding public sector to the commanding heights of the economy to meet the constitutional obligation that 'the material resources of the community are so distributed as best to subserve the common good'.
Since Independence, public sector played an important role to be the principal driving force behind steady growth of the fifties, sixties and seventies and eighties. The contribution of the public sector to national income has increased from 7.5% in 1950-51 to 24% in 1982-83.
The contribution of the public sector through its basic, heavy and strategic industries to the economy and its growth are very significant. The role and contribution of the public sector in the development of many sectors like manufacturing industry, agriculture, and infrastructure and for the development of the whole private sector is noteworthy. The rapid growth of public sector investment in industries has obviously created a strong diversified industrial base.
All such contributions have helped the economy in many ways.
It has promoted small scale and ancillary industries as a result of the backward and forward linkages.
It has promoted agro-based industries and supported agriculture sector by providing many inputs like fertilizer, power, etc.
It has created a sound infrastructural base to help the private sector.
Public sector has exerted a greater influence on the welfare of the people through its vast employment opportunities.
However, all these development rationale have been criticized since nineties by the proponents of market economy and private sector. Still public sector plays many critical roles.