Page 213 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 18: Issues and Problems of Public Sector
Pavitar Parkash Singh, Lovely Professional University

Unit 18: Issues and Problems of Public Sector Notes

CONTENTS
Objective
Introduction
18.1 Issues of Public Sector
18.2 Problems of Public Sector
18.3 Summary
18.4 Key-Words
18.5 Review Questions
18.6 Further Readings

Objective

After reading this Unit students will be able to:
• Discuss about the Issues and Problems of Public Sector
Introduction

Prior to 1947, there was virtually no “Public sector” in the Indian economy. The only instances worthy
of mention were the Railways, the Posts and Telegraphs, the Port Trusts, the Ordnance and Aircraft
Factories and a few State managed undertakings like the government salt factories, quinine factories,
etc. The idea that economic development should be promoted by the State actually managing industrial
concerns did not take root in India before 1947, even though the concept of planning was very much
discussed by Congress governments in the Indian provinces. However, in the post-independence
period, the expansion of public sector was undertaken as an integral part of the 1956 Industrial
Policy.
18.1 Issues of Public Sector

The Industrial Policy Resolution 1956 gave the public sector a strategic role in the Indian economy.
For one thing, at the time of independence, the country was backward and underdeveloped — basically
an agrarian economy with a weak industrial base, heavy unemployment, low level of savings and
investment and near absence of infrastructural facilities, Indian economy needed a big push. This
push could not come from the Indian private sector, which was starved of funds and of managerial
ability and was incapable of undertaking risks involved in large long-gestation period investments.
It was assumed at that time that only the Government intervention in a big planned way could
accelerate agricultural and industrial production, expand employment opportunities, reduce poverty,
etc. In other words, the public sector was thought of as the engine for self-reliant economic growth to
develop a sound agricultural and industrial base, diversify the economy and overcome economic
and social backwardness.
To this basic argument for the expansion of the public sector, the Government added additional
reasons over time, e.g. :
(a) to accelerate the growth of the core sectors of the economy;
(b) to serve the equipment needs of strategically important sectors like Railways,
Telecommunications, Nuclear Power, Defence, etc.
(c) to exert countervailing power on the operation of private monopolies and multinationals in
selected areas;

LOVELY PROFESSIONAL UNIVERSITY 207