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Unit 18: Issues and Problems of Public Sector

With regard to workers’ participating at various levels including board level, it is beset with a number Notes
of problems relating to selection of employees to be represented on the Board of Management.
Autonomy and Accountability

‘Autonomy’ implies “freedom to act” and is related to “freedom in internal management”.
Autonomy in the case of public enterprises does not imply ‘full freedom’ to act as desired by the
individual enterprise management. The Public Enterprises are accountable to Parliament through
the concerned minister and therefore cannot act freely.
At the same time the public enterprises should be accorded sufficient autonomy to run their operations
on business lines. It facilitates quick decision-making and encourages initiative. Accountability of the
public enterprises implies rendering of accounts to the public - the ultimate owner of these enterprises.
According to S.S. Kher, “accountability involves measurement of top management. It must be
remembered that the accountability that we are talking of, is accountability, which has a particular
purpose - a demonstrably useful purpose. A distinction has to be drawn between accountability and
control. Control is active function while accountability is a passive function. Control means directing,
restraining, or stimulating an organisation or individual to a certain action. In fact, control facilitates
accountability. An accountable individual or organisation has to possess control power to give true
account.
18.2.1 Role of the Public Sector in India

After the attainment of independence and the advent of planning, there has been a progressive
expansion in the scope of the public sector. The passage of Industrial Policy Resolution of 1956 and
the adoption of the socialist pattern of society as our national goal further led to a deliberate
enlargement of the role of public sector.
To understand the role of the public sector, we must have a comprehensive view of the entire public
sector. We should include besides autonomous corporations, the departmental enterprises. While
doing so, not only the enterprises owned and run by the Central Government be covered, but the
enterprises run by the State Governments and local bodies should also be included.
It would not be appropriate to use any single measure to estimate the role of the public sector in the
Indian economy, rather it would be desirable to use a few indicators, e.g., employment, investment,
value of output, national income generated, savings, capital formation and capital stock.
Share of Public Sector in Employment
There are two important categories of public sector employment : (a) Government administration
and defence and other government services like health, education, research and various activities to
promote economic development; and (b) public sector proper, i.e., economic enterprises owned by
the Centre, State and Local Government. The total number of workers employed in the public sector
in 1971 was 111 lakhs, but by March 2006, their number grew to about 182 lakhs before falling to 180
lakhs in 2007. Since employment in the public sector is confined to the organised sector, public sector
employs 65.9 per cent of the workers employed in organised sector of the Indian economy.
Share of the Public Sector in GDP

During the last five decades, the share of the public sector in gross domestic product (GDP) has
shown a steady improvement. Measured at current prices, public sector accounted for 7.5 per cent of
GDP in 1950-51, its share in 1993-1994 had risen to 23.6 per cent. However, it declined to 20.8 per cent
in 2008-09. Public sector, therefore, accounts for about one-fourth of national output. This is largely
due to a rapid expansion of the public sector enterprises.
There is a big increase in the share of public administration and defence from 4.5 per cent to 8.7 per
cent between 1950-51 and 2007-08. The share of public sector enterprises, however, rose from 3 per
cent in 1950-51 to 11.2 per cent in 2008-09. Despite this fact, the private sector still occupies a dominant
position in the economy. There are some sectors such as agriculture and small-scale sector in which

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