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Role Of Public Enterprises In India


Posted Date: 07-Oct-2010  Last Updated:   Category: General    
Author: Member Level: Gold    Points: 8


Public sector enterprises are those that are managed, controlled, owned and financed by the state or central government or both. They are very important for the development of a country.



Significance of Public Sector Enterprises



i)Generation of Employment and income
Public sector enterprises has been playing a positive role in generation of income and employment opportunities. The share of public sector in country's national income has increased from 7.5% in 1950 to 26% in 2000. Also the public sector enterprises provided employment to almost 158 lakh people in 1981 which has now increased up to 193 lakh in 2000.

ii)capital Formation
Capital formation means the net addition made to the existing stock of capital goods.The share of public sector in gross domestic capital formation has increased has from just 46% to 61%.

iii)Infrastructure
Without the development of infrastructural facilities, economic development is not possible. These infrastructure are developed only by the public sector as private sectors do not take interest in in their development due to the lack of resources and less profitability. During the eighth year plan, a sum of rupees 108124 crores was spent on the infrastructure.

iv)Strong industrial base
There is no denying the fact the rapid industrialization during the first three decades after independence was mainly due to the public sector.The government reserved certain industries namely railways, nuclear weapons, arms and ammunitions for the public sectors as it was difficult to trust the private sector in view of national security. Industries like iron and steel, petroleum etc. have also been developed by the public sector. Thus, by building a strong industrial base the public sector has opened the path for rapid industrialization in the country.

v)Export promotion and import substitution
Public sector enterprises have contributed a lot in the promotion of India's exports.This has resulted in the foreign exchange earning. Public sector enterprises like Hindustan Machine Tools, State Trading corporation etc. are playing a vital role in this regard. In 2000, public sector exports stood at Rs.18147 crores. On the other hand, some public sector enterprises have paved way for import substitution. Import substitution means replacement of a imported product by indigenous material and know-how. Bharat Heavy Electrical Ltd. , Bharat Electronics Ltd. , Indian Oil Corporation etc. are playing a led role in saving our valuable foreign exchange.

vi)Balanced regional development
From the very beginning, industrial development has been centralized towards big cities like Mumbai, Kolkata and Chennai. In order to remove regional imbalances public sector has done a remarkable job. It has developed industries in backward areas like Bihar, Orissa, Madhya Pradesh. Three big steel plants in the public sector have been established in these backward states. In Tamil Nadu, the Neyveli Lignite Project has been started which serve on the basis of so many other industries. Similarly an atomic energy plant has been set up in Rajasthan.
Besides,various public sector financial institutions such as IFCI, IDBI, UTI etc. promote cheaper credit facilities to establish industries in the backward regions of the country.

IN SHORT, PUBLIC SECTOR IS PLAYING A KEY ROLE IN ALL-ROUND DEVELOPMENT OF THE COUNTRY.


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