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Role Of Public Sector In Industrial Development During Planning Decades

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Today India is emerging as a major industrial hub in the world and it has become possible because of the PSUs (Public Sector Undertakings) and PSEs (Public Sector Enterprise) in India. The Public Sector undertakings are directly managed and financed by the central and state government of India, and also significantly contribute to the Indian economy. At present, there are 277 PSUs in India among which the IOCL (Indian Oil Corporation Ltd) is the largest one. These profitable PSUs of India are the main reason behind providing the public sector with a leading role in industrial development during the planning period.

The Public Sector in India:

The public sector refers to any government-owned, statuary corporation, nationalize institution/organization, etc. The public sector in India is often called PSU (Public Sector Undertaking), PSU (Public Sector Unit), or PSE (Public Sector Enterprise). These institutions or organizations can be completely or partially owned by the state or the central government of India. If it is owned by the state then it is referred to as SPSU (State Public Sector Undertaking) or SPSE (State Public Sector Enterprise) but if it’s owned by the central government then it is called CPSU (Central Public Sector Undertaking) or CPSE (Central Public Sector Enterprise).

During the financial year 2018-19, the CPSE earned revenue of around Rs 25.43 lac crores.

Some of the major reasons for providing the public sector with a leading role in industrial development during the planning period are discussed below.

  • Capital Requirement:

After the independence, India was going through a struggling phase. The economy was weaker and also India didn’t have a good presence among major nations to attract foreign investment. Thus, in such a scenario, GOI selected PSUs to initiate industrial development in India. During the planning period, the private entrepreneurs were not ready to make big investments because of the risk involved in projects due to the long gestation period. Thus, the Public sector undertakings took over the industrial development, in the beginning, followed by the private sectors in the upcoming years.

  • Less Demand:

At the time of independence, there per capita income of an individual staying in India was around Rs. 250/annum. The majority of the population in India, at that time, was poor, and thus generating demand for supplies was a difficult task. Also due to less demand, it was quite difficult for private investors to invest money and increase supplies with such a less demand. So, in this situation, the only public sector was able to make investments and generate and meet the demand locally as well as globally.

  • Employment Generation:

After independence, a majority of the population in India was unemployed or employed on daily wages with no job security. Thus it became very important at that time to create employment opportunities that escalate the economy as well as the living standards of people living in India. Thus in 1948, the GOI established the first PSU of India which was ITI (Indian Telephone Industries) at present it has an employee strength of more than 2500 employees. In the Public Sector Undertakings GOI reserved seats for the people belonging to the backward castes to uplift their social standing in the society.

  • Removal of Regional Discrimination:

Since British rule, India observed that there often discrimination takes place on the basis of regions. Thus, choosing the public sector for initiating the industrial development during the planning period made sure that there should not be any discrimination on the basis of region, caste, sex, race, etc. An individual belonging to any state or region holds an equal right to get into the public sector.

  • National Security:

During the planning period, GOI made sure that industrial development does not compromise national security. As the public sector undertakings are directly managed by the central government of India it becomes easy for the government to keep an eye on the industries.

Public Sector Contribution to the Indian Economy:

Along with the private sector the public sector also equally contributes to the Indian economy.  Discussed below are some of the ways in which the Public sector contributes to the Indian economy.

  • Capital and Income Generation:

The public sector plays a positive role in growing the Net Domestic Product (NDP). Just after the independence the share of the Public sector in the NDP in 1950 was 7% which raised up to 21.7% in 2003-2004. Also, the Public sector plays a significant role in the generation of the national capital. During the planning period i.e. in the first plan the contribution of the public sector to the GDP of India was 3.5% which grew up to 9.2% in the 8th  plan

  • Strong Industrial Base:

The public sector was quite successful in providing India with a decent industrial base due to which India soon turned into a major industrial hub in the world. The foundation laid by the public sector industries provided motivated private investors to invest in the Indian industries. As all the industries are interdependent on each other, the large-scale public sector industries created a demand that was fulfilled by the small-scale industries of India. The products manufactured by the Indian Public Sector Industries act as raw materials for many Multi-National Companies. For example, many countries import cotton yarn made from Indian textile industries. The largest PSU of India i.e. IOCL (Indian Oil Corporation Limited), only earned a profit of more than Rs. 6235 Crores in the financial year 2021-22. Thus the Public sector of India not only created strong a strong industrial base but also significantly contributed to the economic growth of India.  

  • Employment Generation:

The public sector of India generates great employment opportunities for the citizens and by 2017, there are 11,30,840 people employed in the central public sector enterprises. The GOI is offering employment in the public sector in various categories like defence, administration, and other government services. The job security in the public sector is way more than compared in the private sector, thus it is a dream sector to work in for many youths. 

  • Export Promotion:

The Public sector Units of India produced a large number of essential goods and the expert sales of India kept on constantly increasing. The total export sales increased by almost 24% with total export sales of more than  Rs. 38 Billion USD in the financial year 2021-2022. The PSUs of India also reduced the imports as these industries started manufacturing every basic necessity. For example, before independence, India was quite reliable to other nations for fuel but today with more than 18 Public sector petroleum refineries India stood as a major exporter of petroleum products.

  • Checking Concentration of Income and Wealth:

The idea of providing the Public sector of India a leading role in industrial development during the planning period was quite good. As it also ensured that the total wealth and the doesn’t get concentrated. The public sector provided everyone with an equal chance to earn. Also, the profits earned by the PSUs come back to the government that is further used by the government for the welfare of the national citizens.

  • Contribution to Central Exchequer:

The PSUs of India significantly contribute to the Central Exchequer and after the independence, the contribution of the public sector to the Central Exchequer kept on increasing for example in the financial year 2016-17 the contribution of CPSEs to the Central Exchequer was more than Rs 36 Trillion.

Last Updated : 19 May, 2022
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