6 Most Important Facts You Might Not Know About the Rise of Public Sector Industries in India

The adoption of the socialist pattern of society as the national objective as well as the need for planned and rapid development requires that all industries of basic and strategic importance, or in the nature of public utility services, should be in the public sector.

Other industries which are essential and require investment on a scale which only the state in the present circumstances could provide have also to be in the public sector.

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The state has, therefore, to assume direct responsibility for the further development of industries over a wider area.

The responsibility for new developments in basic and capital goods industries must be undertaken in the main by the State and the existing units have also to fall in line with the emerging pattern.

Public ownership and public control are especially required in those fields in which technological considerations tend towards a concentration of economic power and wealth.

In a growing economy which gets increasingly diversified there is scope for both the public and the private sectors to expand simultaneously, but it is inevitable, if development is to proceed at an accelerated rate and to contribute effectively to the attainment of the larger social goals that the public sector must grow not only absolutely but also relatively to the private sector.

2. Socio-economic objectives:

Reduction of inequalities of wealth and income is the most important socio-economic objective. Elimination of poverty and the establishment of an egalitarian society through a policy of redistribution constitute the objectives of planning in India.

It has to be ensured that in the course of economic development, economic power does not concentrate in the hands of a few big capitalists. Deduction of excess wealth and income is generally made by fiscal measures.

Another social objective is to help the underprivileged. Though not laid down as a specific objective, the public sector has been used to promote the development of certain backward sections of society viz., the Scheduled Castes and Scheduled Tribes.

It was directed to make reservations in appointments at lower levels in respect of deaf, blind and orthopedically handicapped. Private enterprise, with a commercial outlook, is likely to ignore such social obligations.

Nationalised banks have come out with numerous schemes to help the economically backward and vulnerable sections of the society.

This important social purpose was never served adequately before the nationalisation of banks. The differential rate of interest scheme seeks to benefit mainly the weaker sectors in the rural areas.

3. Balanced Regional Development:

One of the objectives of planning is to secure the balanced development of all parts of the country. In order that industrialisation may benefit the economy as a whole, it is important that disparities in the levels of development between different regions should be progressively reduced. The entire economy can attain higher standards of living by securing a balanced industrial development.

One of the declared objectives of industrial policy is to bring about a reduction of regional disparities in industrial development so that industrialisation may benefit all the regions of the country.

In the scheme of development of industries in the public sector, priority is given to the backward regions. Steel plants at Rourkela, Bhilai and Durgapur are cases in point.

While private entrepreneur’s decisions on industrial location are governed by profitability, the State’s decisions are governed by net social benefit. Society takes into account both output and its distribution in net social benefit while the private entrepreneurs consider only the output.

4. Need for Rapid Economic Development:

The imperative need of the hour is a rapid economic development. The private sector has neither the desire nor the resources to undertake the massive programme of industrialisation.

Hence dependence on the private sector only will make the economic development slow. Expansion of public enterprise will speed up the rate of economic growth.

5. Pattern of Resource Allocation:

The main reason for the expansion of the public sector lies in the pattern of resource allocation decided upon under the plans. In the first Plan, the major emphasis was on agriculture but in the second Plan the emphasis was shifted to basic and capital goods industries.

During the first plan period, the private sector was dominant in the field of industrial activities. But with changed emphasis it was inevitable that the public sector must grow not only absolutely but also relatively to the private sector.

6. Building up Infrastructure:

Infrastructure provides certain basic facilities for rapid economic growth. In the economic infrastructure, there are facilities like power, irrigation, transport and communication, banking, training etc. Social infrastructure includes education, health, sanitation, drinking water facilities etc.

The development of infrastructure is not possible through efforts of private individuals since its benefits go to the society as a whole and not to individuals. It is therefore mainly the responsibility of the State.

The infrastructure has accounted for 95.1 per cent of the public outlays in the first Plan and nearly 75 per cent in the subsequent plans.

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