Question

Though Public Sector is very essential for industries, many public sector undertakings incur huge losses and are a drain on the economy's resources. Discuss the usefulness of public sector undertakings in the light of this fact.

Answer 1

 SIGN UP FEATURED VIDEOS

 : +91 9144518651  : [email protected]

Search.....

GO!

11th Class Economics Indian Economy (1950-1990)

question_answer Though public sector is very essential for industries, many public sector undertakings incur huge losses and are a drain on the economy's resources. Discuss the usefulness of public sector undertakings in the light of this fact.



Answer:

Although, the inefficiency and low productivity in Public Sector Undertakings (PSUs) may lead to wastage of the scarce resources and result in huge losses forming a constraint on economic resources of the country, they do have some advantages, (i) Social Welfare The basic objective of the PSU was to provide goods and services that add to the welfare of the society without looking for profits. Public welfare facilities such as schools hospitals, railways, electricity etc are necessary to be provided at reasonable cost to the people of the country. (ii) Heavy Investment and Long Gestation Projects Projectslike heavy and basic industries, power generation, railways, etc need a very huge initial investment and have long gestation period. Hence, government is the most appropriate to invest in these projects under public sector as private sector is reluctant to enter such ventures due to the high risk involved. (iii) Basic Infrastructure An important ideology that was inherited in the initial Five Year Plans was that the public sector should lay down the basic infrastructure required for Industrialization that would encourage and facilitate the private sector at the later stage of industrialization. (iv) Reduce Exploitation It is believed that In public sector units the labour is not exploited as it Is protected by the government. The consumers are also not exploited by charging high prices or serving low quality goods as PSUs do not operate with profit motive. (v) Generate Employment Private sector does not have the Inducement to invest and create employment opportunities during periods of low demand i.e., during economic recession. During such phases, PSUs are needed to generate employment opportunities with the help of government investment. Apart from this job security is also provided by the PSUs to their employees.

hope this answer helpful.