Q.Distinguish between Public and Private Sector Enterprises
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Start your 14-day free trial to unlock the full solution →Public sector enterprises are owned/controlled by the government and aim primarily at social welfare and balanced development, funded by the public exchequer; private sector enterprises are owned by private individuals/entities and aim primarily at profit, funded by private capital. Since 1991, the public sector's role has narrowed from dominating the economy to focusing on strategic/core sectors, with large-scale disinvestment and increased competition from the private sector.
Part 1 - Distinguish between Public and Private Sector Enterprises
| Basis | Public Sector Enterprises | Private Sector Enterprises |
|---|---|---|
| Ownership | Owned and controlled by the Central/State Government | Owned and controlled by private individuals/groups |
| Main objective | Social welfare, balanced regional development, and service to the public | Profit maximisation for the owners/shareholders |
| Source of capital | From the government/public exchequer (taxes, government borrowings) | From private individuals, shareholders, banks and financial institutions |
| Management | Managed by government-appointed officials/boards, often subject to ministerial/parliamentary control | Managed by the owners themselves or professional managers appointed by them |
| Accountability | Accountable to Parliament/State Legislature and the public | Accountable mainly to the owners/shareholders |
| Examples | ONGC, SAIL, BHEL, Indian Railways | Reliance, Tata Motors, Infosys |
Part 2 (OR) - The changing role of the public sector
At Independence and up to 1991, the public sector occupied the 'commanding heights' of the economy — it was expected to build the industrial base (steel, power, heavy machinery), develop infrastructure, reduce regional imbalances, generate employment, and prevent concentration of economic power, since private capital was scarce and reluctant to enter capital-intensive, long-gestation industries.
Since the 1991 New Economic Policy (LPG reforms), its role has changed substantially:
- Reduction in the number of reserved industries — areas earlier reserved exclusively for the public sector were opened up to private and foreign investment; today only a very small number of strategic sectors (atomic energy, railway operations) remain reserved.
- Disinvestment and privatisation — government equity in many PSUs has been sold off (partly or wholly) to raise resources and improve efficiency. …
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