Question

which of the following was not a reason for the public sector to play a major role in the initial phase of indian economic planning ?

Answer 1

Answer:

Public sector has played an important role in achieving industrial self reliance. Iron and steel, railway equipment, petroleum, coal and fertilizer industries, have been developed in this sector. ... The main thrust of the industrial policy was to remove regional imbalances and to introduce diversification of industries.

the government played the leading role to provide the basic framework of heavy industries and infrastructure through public sector to facilitate the private sector

Answer 2

Answer:

The market was big enough to encourage private industrialists for investment. It was not a reason for the public sector to play a major role in the initial phase of indian economic planning.

Explanation:

At the time of independence, India's economic conditions were very poor and weak. Neither was there much private capital, nor did India have the international investment credibility to attract foreign investment. Moreover, Indian planners did not want to be economically dependent on foreign capital

development. In such a situation, only the public sector could take the initiative. Below are the reasons that explain the driving role of the public sector in industrial development

(i) Requirement of heavy capital Large amount of investment in infrastructure and heavy and basic industries was needed for economic development Private sector in India on the eve of independence did not have the capacity to invest such large amounts .Private entrepreneurs were not ready to bear the risks associated with these projects which had a long gestation period along with high capital investment.Government thus played a major role in providing the basic framework of heavy industry and infrastructure through the public sector to facilitate the private sector.

(ii) Low level of demand For exploitative colonial rule, the majority of the Indian population remained poor and had very low purchasing power. Thus, the private sector was not motivated to invest, which could lead to low levels of private sector employment, further reducing demand. The only way to boost demand was public investment sector. So the role of the public sector was needed to invest massively to increase people's income, which in turn could increase demand and so on.

(iii) Social Security Most of the Indian population suffered from abject poverty at the beginning of planning. Therefore, strategic industries and sectors involving social considerations could not be left to the private sector, which would operate with a profit motive rather than a social welfare motive. Thus, such industries were left under the public sector.

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