Question

Write short answer to the followings.

How are government company useful for economic development?

Answer 1

Government companies are considered to be powerful engines of growth and development in India. The following factors highlight the role of government companies (public sector) in economic development:
i. Infrastructural development: Development of infrastructure is a prerequisite for the development of any country. In this regard, the government company has made huge capital investments in the development of infrastructural facilities which has contributed to the economic growth and development of India.

ii. Regional balance: During the pre-independence period, industrial development was confined only to a few selected sectors. However, after 1951, public sector enterprises (government companies) were set up for the development of the backward sectors of the economy. This was done in order to maintain a regional balance in all the states and, thereby, promote economic.

iii. Self-sufficiency: To become a self-sufficient economy, India required heavy machinery and foreign exchange. Obtaining these resources were a major challenge for the private sector companies. Thus, the government companies enterprises were established to get involved in heavy engineering with the help of government resources and capital.

iv. Import substitution and export promotion: To attain self-reliance, the government aimed at restricting imports and maximising exports. In this regard, many government companies were established to produce heavy machinery and engineer domestically to restrict the imports of these goods. Simultaneously, with the aim of maximising exports, public sector enterprises (government companies), such as MMTC and STC, were established.