Private Sector and Public Sector

As you learnt in the previous chapter, businesses in India come in many forms and ownership patterns. Because the Indian economy contains both privately owned and government owned enterprises, it is described as a mixed economy — the Government of India has deliberately chosen a system in which private and government enterprises are both allowed to operate. On this basis the economy is divided into two sectors: the private sector and the public sector (with global enterprises operating across countries as well).

The private sector

• Consists of businesses owned by individuals or a group of individuals.
• Its various forms of organisation are the sole proprietorship, partnership, joint Hindu family, cooperative and company.

The public sector

• Consists of organisations owned and managed by the government.
• These may be partly or wholly owned by the central or the state government.
• They may be run as a part of a ministry, or come into existence through a Special Act of Parliament.
• Through these enterprises the government takes part directly in the economic activities of the country.

How the government defines each sector's role — the Industrial Policy Resolutions

From time to time the government's industrial policy resolutions have marked out the areas in which the private and public sectors may operate:

• Industrial Policy Resolution, 1948: set out the approach to developing the industrial sector, clearly defining the roles of the private and public sectors; through various Acts and Regulations the government oversaw the activities of both.
• Industrial Policy Resolution, 1956: laid down objectives for the public sector so as to accelerate growth and industrialisation. The public sector was given great importance, while the mutual dependence of the public and private sectors was emphasised. …