The public sector has been steadily growing since independence. Starting with just 5 enterprises in central sector with an investment of Rs. 29 crores, their number rose to 240 in April 1986, with a total investment of nearly Rs. 61,000 crores, employing about 20 lakh people.
Their activities range from production of sophisticated items to heavy equipment’s and from area of financial management to construction, consultancy and research and development etc. They are now the basis for the economic growth of the country.
The presence of public enterprises in the Indian economy was instrumental in transforming India from backward agricultural economy to an industrial nation whose Gross National Product in terms of volume is among the first ten in the world.
The public sector, as a whole, accounts for 50 percent of the gross investment in the economy and provides employment to over 20 million people (including public sectors under state governments), 70% of the employment in the organised sector.
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Public enterprises have contributed not only in quantitative terms, but also qualitatively by high standards of employee welfare and remunerations, which serve as a model for other organisations to emulate. These have played a significant role in setting up Research and Development facilities in the basic industries.
The Bureau of Public Enterprises was set up, with the object of integrating and strengthening the co-ordination and examining the technical economic and financial aspects of the projects and the working of the enterprise.
In 1976, another organisation named, Standing Conference of Public Enterprises (SCOPE) was formed with the object of, assisting public sector to help in improving its total performance, and advice to the community and the government by conveying such information, which would generally help the public sector in this role.
Following are the main activities of the Scope:
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1. Consultative management. SCOPE is an effective forum of consultation and participative management in public enterprises. SCOPE’ advice is taken into account by Government before finalising policy guidelines.
2. Management development of public enterprises by organising seminars, meetings, conferences etc.
3. Employers Organisation. It represents employers.
4. Bridging the communication gap.
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5. Economic research. It undertakes research on the performance and problems of public sector.
It consists of all industries and other business owned and managed by the Indian people through the state.
Main reasons for the existence of public sector in India are:
(a) Huge capital needed for projects like aircraft, shipping, fertilizers, iron and steel, heavy electricals, machine building, essential drugs etc. which cannot alone be invested by the private enterprises.
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(b) It is necessary that vital sector of the economy should be controlled by the representative of the people i.e. the government.
India’s economy was stagnant since the advent of East India Company.
For stirring the economy of the nation, public sector was considered necessary to discharge the following responsibilities:
1. To increase productivity by modern techniques.
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2. To apply modern management techniques to obtain more leisure for the workers and better productivity.
3. To prevent concentration of ownership of production means.
4. To ensure balanced regional development.
5. To increase employment opportunities.
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6. To make available, suitable engineers and technicians for handling modern sophisticated machines and instruments.
7. To lay foundation for a self-generating and self-reliant economy.
8. To strengthen country’s defence potential.
9. To keep the prices down.
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Public sector consists mostly of areas requiring large sums of money i.e.:
(i) Heavy basic industries,
(ii) Industries significant from the defence point of view and
(iii) Which provide public utility.
For the growth of smaller industries, these heavy industries are essential. Heavy industries require a lot of capital, advanced modern technology and a long period of waiting.
It derives its finances in the form of loans and equity capital from the government.