What is public sector? Discuss the role of the public sector in the Indian economy.
Ans. The public sector is the part of economic life, not in private ownership, that deals with the production, delivery, and allocation of basic public goods, and services at global, regional national, or local levels. The organisation of the public sector (public ownership) can take several forms, including: • Direct administration funded through taxation. The delivering organisation in such cases generally has no specific requirement to meet commercial success criteria, and production decisions are determined by the government. Publicly owned corporations (in some contexts, especially manu- facturing, "state-owned enterprises") - such organisations differ from direct administration in that they haye greater commercial freedom and are expected to operate according to commercial criteria, and, moreover, production decisions are not generally taken by government (although goals may be set for them by government). Partial outsourcing (of the scale many business do, e.g. for IT services) – is considered a public sector model. • A borderline form of public sector is complete outsourcing or contracting out, with a privately owned corporation delivering the entire service on behalf of government. This may be considered a mixture of private sector operations with public ownership of assets, although in some forms the private sector's control and/or risk is so great that the service may no longer be considered part of the public sector. Role of Public Sector in the Indian economy: Public sector plays a significant role in Indian economic development. Following points may be noted to explain the increasing role of public sector in the Indian economy: (1) Capital Formation: According to Prof. Nurkse capital formation plays a significant role in the economic development of an underdeveloped country. In underdeveloped countries savings rate is very low. Low savings lead to low capital formation. This problem can be overcome through public enterprises. The following table shows the relative contribution of public and private sectors in capital formation in India.
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