Role of Public Sector Units in Development of a Country

By | July 15, 2017
Development

Last Updated :

Introduction

In the twenty-first century, development is a lust that almost every nation has. Because at the international level, development is that reason that is used to decipher where a country stands.

And at the same time, no discussion on development is ever complete without public sector units. Especially for a country like India, which has a weak industrial base, development would have been an ever-longing struggle without public sector units. Ever since independence, public sector units have been perceived to accelerate the growth of core sectors of the economy; to serve the equipment needs of strategically important sectors, and to generate employment and income. [1]

It is known to all that public sector units are the state-owned enterprises where 51% or more of the paid-up share capital is held by the central government or by any state government or partly by the central governments and partly by one or more state governments. [2] Public sector units are classified into three types:

  1. Public Sector Enterprises (PSEs)
  2. Central Public Sector Enterprises (CPSEs) and
  3. Public Sector Banks (PSBs).

Each one of them has a predefined role to play when it comes to contribution to the development of a country.

Roles of public sector units

  • Catalyses the Rate of Economic Growth

The public sector enterprises have firmly established the foundation for the construction of a self-generating industrial economy. During the planned era, the public sector has diversified its activities to cover a wide spectrum of industries. Today, the public sector in India has entered into the production of consumer goods such as bread, paper, watches, scooters, T.V., cement, and drugs.

  • Develops Capital Intensive Sector

From this point of view, the public sector in India has earned a magnificent record. The State has successfully implemented various schemes of multipurpose river projects, hydroelectric projects, transport and communication, atomic power, steel, etc. It has much contributed in the fields like nuclear power or steel technology, aeronautics, defense materials, shipbuilding, etc.

  • Agricultural Development

The public sector has played an important role in the field of agriculture as well. It has assisted in the manufacture of fertilizers, pesticides, insecticides, and mechanical implements used in agriculture. Through the various research institutes, the public sector has augmented agricultural productivity by introducing a new high-yielding variety of seeds, preventing crop diseases, and innovating new agricultural practices.

  • Balanced Regional Development

States such as Maharashtra, West Bengal, Gujarat, and Tamil Nadu were industrially developed, while states like Orissa, Assam, Bihar, and Madhya Pradesh were highly backward. Through the extension of PSEs, the government desired to remove such regional imbalances. The policy of dispersal of industries aims at removing regional disparities. A conscious attempt has been made in the successive five-year plans to accelerate the development of relatively backward areas.

  • Increasing Employment Opportunities

The growth of the public sector has led to the expression of paid employment opportunities. In addition to the primary effect of creating employment opportunities, public sector investments also have a multiplier effect on other sectors of the economy. This has a beneficial effect on the total employment place.

Development

  • Model Employer

In India, the State has inaugurated the era of the model employer in contrast to the employer with a feudal outlook. It has laid down guidelines for employer-employee relations and for developing good and efficient staff. The public sector has been the pace-setter in the field of labor welfare and social security. Not only the wages have been substantially increased, the conditions of service have also been improved. For instance, wages in the coal industry have nearly trebled since nationalization.

  • Preventing Concentration of Economic Power

Today, the public sector not only occupies the commanding heights in the economy; it has also penetrated into the production of essential consumer goods. The share of the public sector in the overall industrial production has substantially gone up. This has effectively curbed the concentration of economic power. It has created a countervailing force against the growth of larger industrial houses.

  • Export Promotion and Import Substitution

Today, many commodities “starting from basic drugs to highly advanced equipment’s” are manufactured in public sector, which previously used to be imported from abroad. In certain fields, public enterprises were especially started to meet self-sufficiency and to cut imports from abroad. This has resulted in saving of precious foreign exchange. At present, there is a special drive in the public enterprises to use indigenous materials and domestic skill.

  • Research and Development

Research is essential not only for the introduction of new goods and new technologies of production but also for lowering the cost of production and improving the quality of the product. For the same, a lot of research activities are being carried on in the laboratories of the public sector organizations.

  • Mobilisation of Resources

The public sector enterprises have played an important role in financing the planned development of the country. They have much contributed to the Central Exchequer in the form of interest and various taxes. Besides this, an increasing trend in the generation of internal resources has been witnessed in these enterprises. As per some estimates in the total capital formation of the country, more than 50 % is contributed by the public sector.

In this way, public sector caters to economic and social goals of a nation as well.

For the various indispensable roles that it has public sector units are and will always be a powerful engine of economic development and an important instrument of self-reliance.[3]

Since the inception of independence, India if is flourishing in terms of economic strength and industrial development then that is only because of the PSUs. Recently, the Indian government has invested in public sector banks and inclusion of coal mines in public sector units, which is a way forward in the process of development.

Best examples

Some of the commonly known public sector units in India are named:

Bharat Heavy Electricals (BHEL),NTPC Limited, Oil and Natural Gas Corporation (ONGC), Bharat Petroleum (BPCL), Hindustan Aeronautics, Hindustan Petroleum (HPCL), Mahanagar Telephone Nigam (MTNL), National Mineral Development Corporation (NMDC), Airports Authority of India, Bharat Sanchar Nigam (BSNL), Central Coalfields, Hindustan Paper, Indian Railway Catering and Tourism Corporation, Indian Renewable Energy Development Agency, National Fertilizers, National Seeds Corporation, South Eastern Coalfields, THDC Ltd, Western Coalfields, Bharat Pumps & Compressors, Indian Medicines & Pharmaceuticals Corporation Limited, National Film Development Corporation of India 

Conclusion

Every step made by the government to boost up the public sector units is no less than a revolution that creates history which is cherished for a whilst. Rajiv Gandhi’s idea of manufacturing computers in India, LPG policy, Modi’s remarkable initiative- “Make in India”, is all some paradigms that show the governments regular and active involvement in the management and up gradation of public sector units.

To remove the curse of poverty, illiteracy, unemployment, and disease investing in the public sector units is the only solution that the government can afford in any country. Not just under-developed or developing countries but even the most developed ones keep working on the advancement of public sector units.

India holds a pretty good control over the public sector set-up, by implementing this mixed economy concept, where both private and public sector units have a role. Thus not just prevents monopoly of one but also caters well the growing economic and development needs. This can be even more improved if the government so focuses on the following aspects:

  1. Controlling the cost at every level of public sector enterprises
  2. Increase the production
  3. Reforms in capital base
  4. Increase the competency of the public sector to make it counter the growing competition from domestic and foreign markets.
  5. Identifying superfluous manpower and dealing with it via other modes of employment.[4]

Submitted By – Aishwarya Himanshu Singh

Banasthali Vidyapeeth

References

[1]https://en.wikipedia.org/wiki/Public_sector_undertakings_in_India;(last visited on 23rd June, 16)

[2]http://www.archive.india.gov.in/spotlight/spotlight_archive.php?id=78;(last visited on 23rd June, 16)

[3]http://www.freemba.in/articlesread.php?artcode=140&stcode=8&substcode=10;(last visited on 23rd June, 16)

[4] Smriti Chand, Public sector: Role, growth, and problems; retrieved from http://www.yourarticlelibrary.com/india-2/public-sectors-in-india-role-growth-and-problems/23430/ (last visited on 23rd June, 16)

Author: Mayank Shekhar

Mayank is a student at Faculty of Law, Delhi University. Under his leadership, Legal Bites has been researching and developing resources through blogging, educational resources, competitions, and seminars.