Discuss the rationale for giving a dominant role to the public sector.
Discuss the rationale for giving a dominant role to the public sector.
Public sector was given dominant sole to fulfill the following objections :
(a) Development of infrastructure—During the pre-independence period, infrastructure was not developed, and the private sector did not show any initiative to invest in heavy industries due to lack of trained personnel and finances. Therefore the public sector enterprises were established in the spheres near huge capital investment, complex and upgraded technology and so on to accelerate the pace of industrialisation.
(b) Maintaining Regional Balance—After 1951, the government laid down in its five-year plans that particular attention would be paid to those regions which were lagging behind. Therefore the government had to locate new enterprises in backward areas to accelerate economic development, provide employment to the workforce and develop ancillary industries in these areas to remove regional disparate.
(c) Economics of Scale—Where large scale industries are required to be set up with a huge capital investment the public sector had to step into to take advantage of economies of scale like electric power plants, natural gas, petroleum and telephone industries and so on. These units required a larger base to functional economies which was only possible with government resources and mass scale production.
(d) Check over concentration of economic power—The sector acts as a check over the private sector monopolistic and exploitative trade practices which gave rise to inequalities in income. Therefore the public sector industries were established to promote healthy competition and to prevent concentration of wealth and economic power in the private sector.
(e) Import substitution—India was aiming to be self-reliant in many spheres during second and third five year plan period. At that time, public sector companies involved in heavy engineering which would help in import substitution were established. Simultaneously, several other public sector companies played an important role in expanding exports of the country to overcome the problem of foreign exchange required for meeting import commitments made for industrialisation.
(f) To have balanced industrial development—Government made investments to the core sectors where private sector enterprises were not functioning in the desired directions, but government wanted to promote and develop such sector on priority basis for economic development. Therefore a dominant role was given to public sector to establish a highly competitive market.
Public sector was given dominant sole to fulfill the following objections :
(a) Development of infrastructure—During the pre-independence period, infrastructure was not developed, and the private sector did not show any initiative to invest in heavy industries due to lack of trained personnel and finances. Therefore the public sector enterprises were established in the spheres near huge capital investment, complex and upgraded technology and so on to accelerate the pace of industrialisation.
(b) Maintaining Regional Balance—After 1951, the government laid down in its five-year plans that particular attention would be paid to those regions which were lagging behind. Therefore the government had to locate new enterprises in backward areas to accelerate economic development, provide employment to the workforce and develop ancillary industries in these areas to remove regional disparate.
(c) Economics of Scale—Where large scale industries are required to be set up with a huge capital investment the public sector had to step into to take advantage of economies of scale like electric power plants, natural gas, petroleum and telephone industries and so on. These units required a larger base to functional economies which was only possible with government resources and mass scale production.
(d) Check over concentration of economic power—The sector acts as a check over the private sector monopolistic and exploitative trade practices which gave rise to inequalities in income. Therefore the public sector industries were established to promote healthy competition and to prevent concentration of wealth and economic power in the private sector.
(e) Import substitution—India was aiming to be self-reliant in many spheres during second and third five year plan period. At that time, public sector companies involved in heavy engineering which would help in import substitution were established. Simultaneously, several other public sector companies played an important role in expanding exports of the country to overcome the problem of foreign exchange required for meeting import commitments made for industrialisation.
(f) To have balanced industrial development—Government made investments to the core sectors where private sector enterprises were not functioning in the desired directions, but government wanted to promote and develop such sector on priority basis for economic development. Therefore a dominant role was given to public sector to establish a highly competitive market.
