Summary

Private sector and public sector

• India is a mixed economy where both private and government enterprises operate, so the economy is split into the private sector and the public sector.
• The private sector is owned by individuals or groups, in forms such as sole proprietorship, partnership, joint Hindu family, cooperative and company.
• The public sector consists of organisations owned and managed by the government, partly or wholly, by the central or state government.

Forms of organising public sector enterprises

The government's participation in business needs an organisational framework. A public enterprise may take one of three forms depending on its operations and relationship with the government:

• Departmental undertaking — run as a department/extension of a ministry; not a separate legal entity.
• Statutory corporation — created by a Special Act of Parliament; a financially independent body corporate.
• Government company — under the Companies Act, 2013, with at least 51% of paid-up capital held by the government.

Changing role of the public sector

• At Independence the public sector was to build infrastructure and act as a catalyst; after the 1990s, liberalisation, privatisation and globalisation redefined it to compete actively and be accountable for results. Its role is seen through:
  • Development of infrastructure — only the government could mobilise huge capital, build heavy industry and train the workforce.
  • Regional balance — locating enterprises in backward areas to remove regional disparities.
  • Economies of scale — setting up large units (power, gas, petroleum, telephones) needing a big base.
  • Check over concentration of economic power — preventing wealth and monopoly power collecting in a few private hands.
  • Import substitution — heavy-engineering PSUs for self-reliance, and STC/MMTC to expand exports.
  • Government policy since 1991 — restructure/revive or close PSUs, cut government equity in non-strategic PSUs to 26% or lower, protect workers; achieved through reducing reserved industries (17→8→3), disinvestment, treating sick units like private ones (BIFR, National Renewal Fund), and the Memorandum of Understanding (MoU) system granting autonomy with accountability.

Global enterprises …