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The role of the public sector is as significant and indispensable as the role of private sector in the industrialization of a developing economy. Discuss.

The role of the public sector is as significant and indispensable as the role of private sector in the industrialization of a developing economy. Discuss.

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1 Answer

Some objectives were set-up for the public enterprises which were promoted as an instrument for implementation of the government’s socio-economic policies and because of the following objectives the role of public sector became as significant as the role of private sector:

  • To earn return on investment and thus generate resources for development.
  • To help in the rapid economic growth and industrialization of the country and create the necessary infrastructure for economic development.
  • To promote re-distribution of income and wealth.
  • To create employment opportunities.
  • To promote balanced regional development.
  • To assist the development of small scale and ancillary industries.
  • To promote import substitution, save and earn foreign exchange for the economy.

The public sector was assigned an important role in the industrialization and economic development of the country. Assigning a major role to the public sector in industrializing the country formed an important component of the regulatory framework. Vast areas of industry and infrastructure were exclusively reserved for the public sector. These included railways, telecommunications, air transports, defense, minerals, coals, etc.

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The objective was to enable public enterprises to reach the Commanding heights of the economy. Public sector enterprises were also given preference for licenses in other industries including steel, capital goods and oil refineries. Public sector also enjoyed low financial costs due to equity capital contributions from the Government. PSEs had the privilege of issuing tax exempted bonds, the access to budgetary funds which reduced pressures to minimize costs and charge appropriate prices for their products. On the whole, there was all round protection to the public sector. This is because, unlike the private sector, public sector enterprises had been burdened with multiple objectives such as employment generation, generation of resources for further economic development, reduction in regional disparities, through industrialization of backward areas.

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July 11, 2019
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