Q.Explain the concept of public sector and private sector.

Because India permits both privately owned and government owned enterprises to operate side by side, it is called a mixed economy. On this basis the economy is divided into two sectors.

• Private sector: businesses owned by individuals or a group of individuals, taking forms such as the sole proprietorship, partnership, joint Hindu family, cooperative and company.
• Public sector: organisations owned and managed by the government — partly or wholly, by the central or the state government. They may run as a part of a ministry or be created through a Special Act of Parliament, and through them the government participates directly in the economic activities of the country.

Every day you deal with many kinds of business organisations, and they are not all owned in the same way. Looking at who owns them lets us sort them, and it is precisely this ownership question that separates the private sector from the public sector.

Why India has both — the idea of a mixed economy

• The Indian economy contains both privately owned and government owned enterprises.
• The Government of India deliberately chose a system in which private and government enterprises are both allowed to operate.
• An economy of this kind is called a mixed economy, and on this basis it is divided into 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 rather than by the government.
• Its forms of organisation are the sole proprietorship, partnership, joint Hindu family, cooperative and company.
• Everyday examples: the shop run by a single owner, a larger retail outlet run as a company, and professionals such as lawyers and doctors practising alone or in partnership.

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 — for example the Railways and the post office.

How the two roles were marked out

• The government's Industrial Policy Resolutions (1948, 1956) defined the areas in which each sector could operate, and the New Industrial Policy of 1991 later gave the private sector greater freedom while the government moved towards disinvestment of the public sector.