<–2/”>a >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. These industries were established in industrially backward regions. During the seventh five year plan an emphasis was laid on high technology, high value addition and knowledge based industries like electronics, advanced machine tools and telecommunications.
After independence, systematic industrial planning under different Five Year Plans helped in establishing a large number of heavy and medium industries. The main thrust of the Industrial Policy was to remove regional imbalances and to introduce diversification of industries. Indigenous capabilities were developed to achieve self sufficiency. It is due to these efforts that India has been able to develop in the field of Industry.
The Industrial Policy Resolution 1956 classified industries into three categories with respect to the role played by the State –
- The first category (Schedule A) included industries whose future development would be the exclusive responsibility of the State
- The second (Schedule B) category included Enterprises whose initiatives of development would principally be driven by the State but private participation would also be allowed to supplement the efforts of the State
- And, the third category included the remaining industries, which were left to the private sector
After Reforms of 1991, the main focus was:
i) reduction in the number of industries reserved for public sector from 17 to 8 (reduced still further to 3) and the introduction of selective competition in the reserved area;
ii) the Disinvestment of Shares of a select set of public enterprises in order to raise Resources and to encourage wider
iii) participation of general public and workers in the ownership of public sector enterprises;
iv) the policy towards sick public enterprises to be the same as that for the private sector; and
v) an improvement of performance through MoU (memorandum of understanding) system by which managements are to be granted greater autonomy but held accountable for specified results.
Privatization transfer the ownership of public enterprises to private capital, opening of more industrial areas to private capital and enterprise. The main aim of privatisation is to make use of privately owned resources for collective welfare of the people.
Privatization in generic terms refers to the process of transfer of ownership, can be of both permanent or long term lease in nature, of a once upon a time state-owned or public owned property to individuals or groups that intend to utilize it for private benefits and run the entity with the aim of profit maximization.
ADVANTAGES OF PRIVATIZATION
Privatization indeed is beneficial for the Growth and sustainability of the state-owned enterprises.
• State owned enterprises usually are outdone by the private enterprises competitively. When compared the latter show better results in terms of revenues and efficiency and productivity. Hence, privatization can provide the necessary impetus to the underperforming PSUs .
• Privatization brings about radical structural changes providing momentum in the competitive sectors .
• Privatization leads to adoption of the global best practices along with management and motivation of the best human talent to foster sustainable competitive advantage and improvised management of resources.
• Privatization has a positive impact on the financial Health of the sector which was previously state dominated by way of reducing the deficits and debts .
• The net transfer to the State owned Enterprises is lowered through privatization .
• Helps in escalating the performance benchmarks of the industry in general .
• Can initially have an undesirable impact on the employees but gradually in the long term, shall prove beneficial for the growth and prosperity of the employees .
• Privatized enterprises provide better and prompt Services to the customers and help in improving the overall Infrastructure-2/”>INFRASTRUCTURE of the country.
DISADVANTAGES OF PRIVATIZATION
Privatization in spite of the numerous benefits it provides to the state owned enterprises, there is the other side to it as well. Here are the prominent disadvantages of privatization:
• Private sector focuses more on profit maximization and less on social objectives unlike public sector that initiates socially viable adjustments in case of emergencies and criticalities .
• There is lack of transparency in private sector and stakeholders do not get the complete information about the functionality of the enterprise .
• Privatization has provided the unnecessary support to the Corruption and illegitimate ways of accomplishments of licenses and business deals
ADVANTAGES AND DISADVANTAGES OF PRIVATISATION IN INDIA
• Privatization loses the mission with which the enterprise was established and profit maximization agenda encourages malpractices like production of lower quality products, elevating the hidden indirect costs, price escalation etc..
• Privatization results in high employee turnover and a lot of Investment is required to train the lesser-qualified staff and even making the existing manpower of PSU abreast with the latest business practices .
• There can be a conflict of interest amongst stakeholders and the management of the buyer private company and initial resistance to change can hamper the performance of the enterprise .
• Privatization escalates price Inflation in general as privatized enterprises do not enjoy government subsidies after the deal and the burden of this inflation effects common man.
Disinvestment of a Percentage of shares owned by the Government in public undertakings emerged as a policy option in the wake of economic liberalisation and structural reforms launched in 1991. Initially, it was not conceived as privatisation of existing undertakings but as limited sales of Equity with the objective of raising some resources to reduce budgetary gaps and providing market discipline to the performance of public enterprises in general.
The Twelfth Plan is firmly anchored towards rapid growth is viewed as a necessary condition because it ensures an expansion in the productive capacity of the economy without which a broad based improvement in living standards is not possible. However, it recognises that faster growth is not a sufficient condition simply because one can easily imagine a growth process which may not be sufficiently inclusive to ensure a spread of benefits to the mass of the Population. For example, any growth process which ignores agriculture will miss out on opportunities to improve incomes for a large part of the population. Hence the Twelfth Plan target of accelerating GDP growth is accompanied by a specific target to accelerate growth of agricultural GDP. The Twelfth Plan aims at catalyzing a growth process which has the structural characteristics that will promote inclusiveness.
The private sector now has a demonstrable capability to invest in and stimulate growth in many areas of the economy and public sector initiatives in these areas are therefore no longer necessary. However, the provision of Education, health and essential services for the bulk of the population has to be the responsibility of the State. Thus, while the state should withdraw from areas where the private sector is able to deliver well, this does amount to advocating a reduction in the role of the State: what is needed is a restructuring in the role of the State, reducing its role in some areas but increasing it in others.
Public sector component of development effort, taking the Centre and the States together, amounts to about 12 percent of GDP. About half of this takes the form of Capital Expenditure or investment, with the rest is accounted for salaries for the delivery of services, or pure transfers, as in the case of provision of resources for mid day meals for school children or Nutrition for pre school children; scholarships for disadvantaged groups, pensions for the poor, etc.,
The role of the public sector and private sectors has changed significantly in recent years. These changes have been driven by a number of factors, including privatization, deregulation, competition, Globalization/”>Globalization-3/”>Globalization, technology, and Social Change.
Privatization is the transfer of government-owned assets and services to the private sector. This has been a major trend in recent years, as governments have sought to reduce their role in the economy. Privatization has been seen as a way to improve efficiency, reduce costs, and increase competition.
Deregulation is the reduction of government regulation of businesses. This has also been a major trend in recent years, as governments have sought to free up businesses to operate more freely. Deregulation has been seen as a way to promote economic growth and innovation.
Competition has increased in recent years, both domestically and internationally. This has been driven by a number of factors, including globalization, technological change, and the rise of new businesses. Increased competition has put pressure on businesses to reduce costs, improve efficiency, and innovate.
Globalization is the increasing integration of the world economy. This has led to increased competition, as businesses from around the world compete for customers. Globalization has also led to the rise of new industries, such as E-Commerce and online Banking.
Technology has changed rapidly in recent years. This has led to the creation of new industries and the disruption of existing ones. Technology has also made it possible for businesses to operate more efficiently and reach a wider range of customers.
Social change has also been a major factor in the changing role of the public sector and private sectors. The changing demographics of the population, the rise of the knowledge economy, and the increasing demand for social services have all had a significant impact on the way that governments and businesses operate.
The changes that have taken place in the role of the public sector and private sectors have had a number of implications. These include:
- The public sector has become more focused on providing essential services and regulating the economy.
- The private sector has become more involved in providing social services and addressing social problems.
- The public sector has become more entrepreneurial, seeking to generate revenue through public-private partnerships and other initiatives.
- The private sector has become more involved in public policy, lobbying for favorable regulations and subsidies.
- The relationship between the public sector and private sectors has become more complex and interdependent.
The public sector and private sectors are increasingly working together to address common challenges, such as Economic Development, education, and healthcare. This cooperation is essential to addressing the complex challenges facing Society in the 21st century.
The public sector is the part of the economy that is owned and operated by the government. The private sector is the part of the economy that is owned and operated by private individuals or businesses.
The role of the public sector has changed over time. In the past, the public sector was responsible for providing a wide range of services, such as education, healthcare, and transportation. However, in recent years, there has been a trend towards privatization, which means that the government has been selling off public assets and services to private companies.
There are a number of reasons for this change. One reason is that the government has been trying to reduce its budget deficit. By selling off public assets, the government can raise Money that can be used to pay down debt or fund other programs.
Another reason for the change is that the government believes that private companies can provide services more efficiently than the government can. Private companies are often more motivated to cut costs and improve efficiency in order to make a profit.
The change in the role of the public sector has had a number of effects. One effect is that it has led to a decrease in the number of government jobs. Another effect is that it has led to an increase in the cost of services, as private companies often charge higher prices than the government does.
The change in the role of the public sector has also led to a debate about the appropriate role of government in the economy. Some people believe that the government should play a limited role in the economy, while others believe that the government should play a more active role.
The debate about the appropriate role of government is likely to continue for many years to come.
Here are some frequently asked questions about the changes in the role of the public sector and private sectors:
- What are the main reasons for the change in the role of the public sector?
The main reasons for the change in the role of the public sector are the government’s desire to reduce its budget deficit and its belief that private companies can provide services more efficiently than the government can.
- What are the main effects of the change in the role of the public sector?
The main effects of the change in the role of the public sector are a decrease in the number of government jobs, an increase in the cost of services, and a debate about the appropriate role of government in the economy.
- What is the future of the public sector?
The future of the public sector is uncertain. Some people believe that the public sector will continue to shrink, while others believe that it will remain a significant part of the economy.
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The public sector is responsible for providing essential services such as:
(A) Education
(B) Healthcare
(C) Transportation
(D) All of the above -
The private sector is responsible for:
(A) Providing goods and services
(B) Creating jobs
(C) Investing in new technologies
(D) All of the above -
The public sector is funded by:
(A) Taxes
(B) Borrowing
(C) User fees
(D) All of the above -
The private sector is funded by:
(A) Sales revenue
(B) Borrowing
(C) Investment
(D) All of the above -
The public sector is typically more regulated than the private sector. This is because:
(A) The public sector is responsible for providing essential services
(B) The public sector is funded by taxes
(C) The public sector is accountable to the public
(D) All of the above -
The private sector is typically more innovative than the public sector. This is because:
(A) The private sector is driven by profit
(B) The private sector is not subject to the same regulations as the public sector
(C) The private sector is more flexible than the public sector
(D) All of the above -
In recent years, there has been a trend towards privatization. This means that:
(A) The public sector is selling off assets to the private sector
(B) The public sector is contracting out services to the private sector
(C) The public sector is deregulating the private sector
(D) All of the above -
There are a number of arguments in favor of privatization. These include:
(A) Privatization can lead to efficiency gains
(B) Privatization can lead to innovation
(C) Privatization can lead to lower costs
(D) All of the above -
There are also a number of arguments against privatization. These include:
(A) Privatization can lead to a loss of accountability
(B) Privatization can lead to a loss of control
(C) Privatization can lead to higher prices
(D) All of the above -
The debate over privatization is likely to continue for many years to come. This is because there are strong arguments on both sides of the issue.