Role Of Public Sector In Indian Economy Essay
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The modern concept of a welfare state throws heavy responsibility on the shoulders of the democratic government for boosting up nor only the trade within the country but also our export potential. India has been wedded to the policy of democratic socialism. So we have been discouraging, to a great extent private enterprise though it is not completely eliminated from Indian economy. Before the attainment of independence public sector was limited to Railways, Post and Telegraph, Ordnance and Aircraft factories, etc. After independence, as a matter of policy public sector is given greater importance. Industrial policy resolution states “the State will progressively assume predominant and direct responsibility for setting up new industrial undertakings…..”. The need for the public sector arose because of various reasons immediately after independence. One of the most important reason is to ensure rapid growth of the economy. It is only through the public enterprises that economic uplift of the country is possible.
In fact economically India had been a backward country and in this world of fast development it is not possible to waste a lot of time in becoming economically strong. Consequently, the pace of economic development was to be increased if we were to compete with the more industrialized societies of the world. The target for increasing the national income of India can be achieved with the help of the public sector.
Another reason for expanding the public sector is to remove the regional disparities. As the public sectors are to be set up in the different regions of the country that will help the growth of economy in all the regions. For the performance of economic development public sector can also provide funds. The profit of the Government enterprises can be again invested either in development plans or in some other domains. For example HMT has been able to set up so many industries by reinvesting its profits. As has already been pointed out the most important reason of encouraging the establishment of public sectors is to conform to the professed socialistic pattern of the society. This pattern of society has been kept as one of the objectives in the Directive Principles of State Policy. So the Five Year Plans have taken up this as the major objective of planning. Moreover, in the public sectors the expansion lies in the pattern of resource allocation. In the First Plan agriculture was given greater importance whereas in the Second Plan industries were given more prominence. As a result of it, it was necessary that public sector will definitely increase and utilize the resource allocation in a proper manner.
Organisationally there are four types of public sector enterprises, that is those which are departmentally managed, those which are managed by independent boards, and those which are organized as public enterprises and lastly those which run as banks. In India the non-departmental industrial and commercial enterprises were divided into: (1) under construction; (2) running concerns; () promotional and developmental concerns; and (4) financial institutions. All of them play an important role in the development of our economy. We find that the share of the Government enterprises is steadily increasing though, as compared to the private sector, it is still low. In some important sector like agriculture, State enterprise has no role to play but the Government is taking industries of national importance under its ownership. The banks have been nationalized and the General Insurance companies have also been brought under social control.
Public sector has an important role to play in capital formation. It also helps in the flow of goods and services in the economy. The increase in the production of the goods is going to have salutary effect upon our economy. Apart from it public sector has also been able to create an infrastructure like transportation, communications, and power development.