The sector of production which is under complete control of the government is termed the public sector. A public sector undertaking (PSU) is owned and controlled by the government. The main aim of the sector is to maximize social welfare. It stresses more on the production of capital goods. In India, Nearly 26% of the national income comes from the public sector and about 20% of the total working population is engaged in this sector. This sector enjoys a monopoly form of market.
Objectives of the Public Sector
- To create strong infrastructure
- To reduce inequalities of income and wealth among people
- To generate financial resources
- To create employment opportunities
- To promote balanced regional growth
- To promote exports and reduce imports
On the Basis of the Nature of Work, Public sector enterprises can be classified as
- Departmental enterprises: Enterprises which are owned and controlled by government departments are called departmental enterprises. Examples: Railways, post and telegraph, defence manufacturing
- Statutory undertaking: Certain undertakings are set up under separate acts of the Parliament. Managers of these organisations are appointed by the government, but they do not interfere in the management. Examples: Life Insurance Corporation of India, State Trading Corporation
- Public sector companies: A public sector company is a company which is registered as a joint stock company and most of its shares are held by the government.
Performance of the Public Sector in India
- Share in employment: There are two major categories of public sector development: Government administration and defence and other services such as education and health. Both the central and state governments own public enterprises. The total number of workers employed in the public sector has increased from 107 lakhs in 1971 to 19,314 lakhs in 2000–01. Nearly 70% of the workers were employed in the public sector.
- Share of the public sector in national income: Gross domestic capital has increased from 10.7% in 1950–51 to 24.1% in 1984–85, while the share of the public sector has improved from 3.5% in 1950– 51 to 11.8% in 1980–85. Share of the public sector in gross domestic savings also shows a similar trend. Its share rose from 1.7% to 4% from 1950–51 to 1980–85. The share of the public sector in the gross domestic savings has remained the same, about 17% to 21% during the planning period. The share of the public sector in the national income has increased from 7.5% in 1950–51 to 20% in 2009.
- Share in foreign exchange earnings: In the share of foreign trade, the public sector played an important role to earn foreign exchange and save expenditure. Many imported items are substituted with domestically manufactured modern equipment, capital and machinery. Examples: Bharat Heavy Electrical Limited and Indian Oil Corporation save our valuable foreign exchange.