Classification on the Basis of Ownership of Enterprises
After Independence, two Industrial Policy Resolutions were issued in 1948 and
1956, respectively. Shyama Prasad Mukherji and Pundit Jawaharlal Nehru were the two architects of the Industrial Policy Resolution of 1948. These policy resolutions divided the economy into public and private sectors. It was based on the assumption that large-scale investment in the public sector, a high level of public investments and public sector investment would encourage the growth and profitability of many private enterprises. In India, the government chose a mixed economy to reap the benefits of both capitalistic and socialistic patterns of economic development.
Private Sector in India – Read here
Role of the Private Sector in India – Read here
Public Sector in India – Read here
Objectives of the Public Sector – Read here
Performance of the Public Sector – Read here
Differences between the Private and Public Sectors
| Private sector | Public Sector |
|---|---|
| The private sector refers to all those occupations and economic activities which are owned and controlled by individuals. | The public sector refers to all those occupations and economic activities which are owned and controlled by the government. |
| The main aim of the private sector is to earn profits. | The main aim is not only to earn profits but also to provide key services to the people at low costs. Hence, the public sector may incur losses. |
| Demand and supply of market forces determine production activity. | The government takes the major decisions in the production process. |
Interrelation between Public and Private Sectors
Private and public sectors are inseparable parts of the Indian economy. The private sector depends on the public sector for heavy machinery, banking, and transport, and communication services. Similarly, the public sector depends on the private sector for a variety of goods and services which are consumed by the former to meet collective wants.
Classification on the Basis of Habitation
On the basis of habitation, an economy can be classified into rural and urban sectors.
Features of the Rural Sector in India
- Low density of population: The density of population in the rural sector is lower than in the urban sector. In the rural sector, a higher percentage of the population contributes lesser to the percentage of share in the national income than the urban sector.
- Dependence on agriculture: In the rural sector, nearly 75% of the population are engaged in the primary sectors such as agriculture and fisheries.
- Land use for agricultural activities: A large portion of land is used for agriculture and related activities in rural areas.
Features of the Urban Sector in India
- Greater dependence on industrial and service activities: Most of the urban population is engaged in secondary and service activities such as industrial and construction workers, teachers, engineers, doctors, traders and servants.
- Higher density of population: The population density in urban areas is higher than that in rural areas.
- Greater part of urban land areas under industrial and service activities: Most of the urban areas are used for building factory sheds, schools, colleges, banks, hospitals, residential houses and markets.
- Higher incidence of pollution: Industrial and vehicular emissions cause air and water pollution. This poses a serious health hazard in urban areas