India: Analysis of public and private sectors
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Published: Mon, 5 Dec 2016
List all the sectors in Indian economy and see how these sectors are divided – Public/Private sector. Discuss which all sectors do you think should be controlled by government and which all should be privatized?
Indian economy is the eleventh largest economy in the world by nominal GDP. India is an emerging economic power with very large group of human and natural resources and large group of skilled professionals. Economic predict that by 2020 India will be the leading economies of the world. India was under social democratic based policies from 1947 to 1991. The economy of India is characterised by extensive regulation, protectionism, public ownership, corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country toward a market based economy. By 2008 India had establish itself as the world second fastest growing major economy. A revival of economic reforms and better economic policy in 2000s accelerated India’s economic growth rate.
Due the massive growth of the Indian middle class this huge country may become Asia’s first major ‘buy’ economy in the world. Indian GDP grown at 7.8% during 2005-2006. India is a socialist controlled economy. India’s huge amount of labour, trained technical manpower and English-speaking population are seen as valuable assets in the global economy, particularly in the services, research and manufacturing sectors. Growth in the Indian economy has increasingly since 1979 and averaging 5.7% per year in the 23 year growth record.
In the past, development of the infrastructure was completely in the hand of the public sector and was plugged by corruption, bureaucratic inefficiencies, urban- bias and an inability to scale investment. This has encouraged the government to partially open up infrastructure to the private sector allowing foreign investment. Almost all of the electricity in India is produced by the public sector. Power outages are common. Multy Commodity Exchanges has tried to get a permit to offer electricity future markets, India has the world’s third largest road network in the world. Container traffic is growing at 15% a year. Several fiscal incentives were announced by the government to boost investment in infrastructure project. Ten year tax holiday offered to project in core sector like roads, highways, waterways, sanitation and solid waste management system can now be availed of during initial 20 years.
Project in airports, ports, inland ports, industrial parks, and generation and distribution of power can now avail tax holidays during the initial 15 years. The railways has also started a scheme to privatise several services including maintenance of railway stations, providing meals to passenger drinking water and cleaning of trains. Some project have been executed based on the public -private partnership agreement.
ROLE OF PRIVATE AND PUBLIC SECTOR IN INFRASTRUCTURE SECTOR
In this government owned and operated infrastructure as well as public buildings such as court, school, and houses. The term public infrastructure refers to the industrial capital involved in these activities. An internal improvement is some constructed objects that augment a nation economic infrastructure examples: airports, canal, dams, pipelines, roads, railways etc.
Municipal infrastructure, urban infrastructure and rural infrastructure are often used interchange but imply either large cities or developing nations concerns respectively. The terms public infrastructure or critical infrastructure are also used interchangeably but suggest the addition of some facilities like hospitals, banks and concerns like national security and terrorism which are not under the permission of local officials alone.
In the past years the infrastructure sector is owned by the public sector but now day’s Private sector also plays an active role in the infrastructure sector. In all other infrastructure sector private activity remain passive. This has encouraged the government to partially open up infrastructure to the private sector allowing foreign investment. This has helped in a sustained growth rate of close to 9% for the past six quarters. The railways has also started a scheme to privatise several services including maintenance of railway stations, providing meals to passenger drinking water and cleaning of trains.
INDUSTRY &SERVICE SECTOR
Industrial sector in India contributes meagre 27% of the country GDP. However, about one-third of the industrial labour force is engaged in simple household manufacturing only. In absolute terms, India is 16th in the world in terms of nominal factory output. The reduction of excise duties on the passenger cars from 32 to 24 percent, improvements in the retail credits and reduction in the teriffs has greatly fuelled the growth of the industry.
Economic reforms brought foreign competition, led to privatelisation of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast moving consumer goods. Post liberalization, the Indian private sector, which was usually run by oligopolies of old family firms and required political connection to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labour costs and technology. India is the largest consumer of gold in the world followed by china. The main export destination of India is UK and Switzerland.
The service sector now accounts for more than half of the India GDP. The sector has gained at the expense of the both the agriculture and industry sector throughout the 1990. The rise in the service sector share in GDP marks a structural shift in the Indian economy and takes it closer to the fundamentals of the developed economy. They says that service sector growth must be supported by proposianate growth of the industrial sector otherwise the service sector growth will not be sustainable.
ROLE OF PRIVATE AND PUBLIC SECTOR IN INDUSTRY AND SERVICE SECTOR
A service is helping others with specific needs or wants. The volunteer fire dept. And ambulances, corps, are institution of public sector which provides services to the community. Many public hospitals are also formed. All these services are essential for people lives. A public services may sometimes have the characteristics of a public good. In most cases public services are services, i.e. they do not involve manufacturing of goods such as nuts and bolts
The Indian private sector, which was usually run by oligopolies of old family firms and required political connection to flourish was faced with foreign competition, including the threat of cheaper Chinese imports. In private sector we talk about customer and the customer value proposition. A variety of legal structures exist for private sector business organizations, depending on the jurisdiction in which they have their legal domicile. Individuals can conduct business without necessarily being part of any organization.
More than half of the population is depend upon the agriculture sector. In India around 45 percent of the total land is cultivated. Rice, wheat, pulses, and oilseeds dominate the agriculture production in India. India is the largest producer of tea, jute. Among livestock, cattle, and buffalos are found maximum in India. Indian total production of milk in the world is the highest.
India has largest irrigated in the world. Among cereal production India is third, second largest producer of wheat and rice and largest producer of pulses in the world. Dairy farm, fishery, and forestry are the important parts of the agriculture sector. However full potential of the Indian agriculture as a profitable activity hasn’t been realised as yet. The food grains production in India depends on largely on monsoons. Among other plantation crops, coffee has contributed significantly to the Indian economy since independence. There has been steady rise in the flow of agriculture credit in Indian context. India’s agriculture is highly sensitive to the variability in rainfall. The agency wise share of the credit flow to the agriculture show that commercial bank have accounted for the major share followed by the regional bank and rural banks. India is also fourth largest producer vegetable oil producer. This is because India imports items like palm oil and export items like coconut oil, sunflower oil and soya oil.
PRIVATE AND PUBLIC SECTOR
Agriculture and rural development is a public concern that generated many innovative institutional arrangements. They had in common an interpretation of the imperfections of the state, assumptions on the reasons for failures in implementation and convictions on the most productive and innovative role of markets and civil society organizations for satisfying human needs and attaining development goals. Four aspects are relevant for public sector :
Information and knowledge
The ministries of agriculture have changed their traditional structures. The ministry of agriculture and their organisation were financed with resources of national budget. Public sector organisations are the central in these processes and the equality of institution.
The share of private sector in capital formation in Indian agriculture is three times more than the public sector. This shows the active involvement of the private agencies in the Indian agriculture sector. The private sector, while having the revenue generating mindset, also takes care of the socio issues. The private investment in agricultural sector is on the rise and several agribusiness companies have developed new models to reach to farmers. Some examples of the private agencies are: Tata kisan Kendra, Haryali kisan bazaar, Mahindra krishi vihar, Indiagriline, Pepsi co.
This sector has moved from being completely under pubic control to privatisation. Post independence the Indian government had decided that the telecommunication system would be entirely managed under the public sector. Posts, Telephone, Telegraph were instituted in 19947 under the ministry of communications. In 1984 private companies were allowed to manufacture and market the equipments. Under the policy the government stimulated domestic private investment and foreign direct investment to cover the huge capital requirements.
The telecom services have been recognized the world over as an important tool for socio economic development for a nation. It is the prime support services needed for rapid growth and modernization of various sector of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a rare growth during the last few years and is poised to take a big leap in the future also
The public sector telecom plays a leading role in the country telecommunication development there causal to the modernization of the country. Due to the establishment of the public sector telecom the promotion of the modern telecommunication facilities were improved. The most of the benefit reach to the general public due to this. . In the post modernization era the government undertook trend-setting measures in its policies to bring in strong communication facilities. The telephone facilities including STD & ISD were reached even in remote village areas of the country bringing in radical changes in the lives of people. Example of public telecom sector is: BSNL, VSNL, MTNL and ITI ltd.
The government allowed private sector to operate in the telecom sector. Private participation has also increased saturation in the market with tele-density touching. Private agencies have garnered a huge portion of the wireless market share. The private sector was allowed to compete with the existing public sector services providers in basic services. As regard the private sector the policy has led to freedom in adding to capacities deli censing of some industries and allowing of investment in certain areas.
BANKING AND FINANCIAL SECTOR
Financial sector can be considered as the most exposed sector with respect to globalisation. The banking sector reforms were guided primarily by the recommendation of the committee on financial system. The Indian money market is classified into two sectors: organised and unorganised sector. Organised sector commercial banks and cooperative banks. And unorganised sector are preferred over traditional banks in rural and sub urban areas, especially for non productive purposes like ceremonies and short duration loans.
Prime minister Indira Gandhi nationalized 14 banks in 1969 and followed by six other in 1980 and made it compulsory for banks to provide 40% of their net credit to preference sectors like agriculture, small-scale industry, retail trade, small businesses, etc. To ensure that the bank fulfil their social and developmental goals. . While some of these relate to nationalised banks (like encouraging mergers, reducing government interference, increasing profitability and competitiveness) other reforms have opened up the banking and insurance sectors to private and foreign players. More than the half of personal saving is invested in physical asset such as land, house, cattle, and gold. Indian has the highest rate in the world at 36 percent.
PRIVATE /PUBLIC SECTOR
Initially all the banks in India were private banks. Private sector banks are to be registered as public limited companies in India. The authority is granted a license lies with the RBI. The shares of the private banks are to be listed in the stock exchange. . The new bank would not be allowed to have as its director any person who is already a director in a banking company. Private banking services can be purely optional in nature according to government conditions. Private Banks in India include leading banks like ICICI Banks, ING Vysya Bank, Jammu & Kashmir Bank, Karnataka Bank, Kotak Mahindra Bank, SBI Commercial and International Bank, etc.
The public sector is the one whose working is in the hand of government. The majority of public sector industries are hold by the government. Most of the activities are controlled by the government. Due to the privatization of the public sector banking, their nimbler has reduced to significant extent. The public sector banks has implemented 14 points action plan for strengthening of credit delivery to women and has designated 5 branches as specialized branches for women entrepreneurs. Example of public sector banks are: bank of Baroda, bank of India, bank of Maharashtra, Canara bank, Punjab national bank, Indian bank etc.
India has made huge progress in terms of increasing primary education attendance rate and expanding literacy to approximately two thirds of the population. The right to education at primary level has been made one of the fundamental rights under the Eighty-Sixth amendment of 2002. However the literacy rate of 65% is still lower than the worldwide average and the country suffers from high dropout rate. In India Kerala have the highest literacy rate of 90.92% as compared to other states of India. India improved education sector is main contributors to the economic rise of India. The private education market in India is estimated to be worth $40 billion in 2008 and will increase to $68 billion in 2012.
The Indian government lays importance to primary education up to the age of 14 years referred to as Elementary Education in India. The Indian government has also banned child labour in order to certify that the children do not enter insecure working conditions. Education has also been made free for children for 6 to 14 years of age or up to class 8 under the Right of Children to Free and Compulsory Education Act 2009. Education in India cataract under the control of both the Union Government and the states with some responsibilities lying with the Union and the states having independence for others. In 2004 the Indian parliament allowed an act which enable minority education establishments to search for university affiliations if they approved the required norms. The 2001 figures also indicated that the total number of complete non-literates in the country was 304 million.
The private education market in India is estimated to be worth $40 billion in 2008 and will increase to $68 billion in 2012. Private schools often provide greater results at a portion of the unit cost of government schools. But a private school fails to provide education to the poor families. The ratio of teachers and students in private schools are much better in private schools. Private schools are often operating illegally. Even the poorest often go to private schools although the fact that government schools are free. A study found that 65% of schoolchildren in Hyderabad slums attend private schools.
Education in India is mainly provided by the public sector with control and funding coming from three levels: federal, state, and local. Child education is compulsory. Education in India falls under the control of both the Union Government and the states with some responsibilities lying with the Union and the states having autonomy for others. The Indian government lays importance to primary education up to the age of 14 years referred to as Elementary Education in India.
GOVERNMENT CONTROLLED SECTOR COMPANIES
BHARAT DYNAMIC LTD
BDL was established in July 1970 under the control of Ministry of Defence with the main objective of establishing a production base for guided missiles in India. It is now one amongst a few planned industries of the world having the capability to produce the most advanced guided missile systems for Armed Forces.
BHARAT HEAVY ELECTRICALS LTD
BHEL manufactures over 180 products under 30 major product groups and caters to core sectors of the Indian Economy for example: Power Generation & Transmission, Industry, Transportation, Telecommunication, Renewable Energy, etc. The wide network of BHEL’s 14 manufacturing divisions four Power Sector regional centers, over 100 project sites, eight service centers and 18 regional offices, enables the Company to promptly serve its customers and provide them with suitable products, systems and services – efficiently and at competitive prices.
BHARAT SANCHAR NIGAM LTD
On October 1, 2000 the Department of Telecom Operations, Government of India became a corporation and was christened Bharat Sanchar Nigam Limited(BSNL). Today, BSNL is the No. 1 Telecommunications Company and the largest Public Sector Undertaking of India with authorized share capital of $ 3600 million and networth of $ 13.85 billion. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections.
BONGAIGON REFINERY & PETROCHEMICALS LTD
Bongaigaon Refinery & Petrochemicals Limited (BRPL) was incorporated as Government of India Undertaking under the administrative control of the Ministry of Petroleum and Natural Gas on 20th February 1974. The company became a subsidiary of Indian Oil on 29th of March 2001 after disinvestments of share by Govt of India.
COAL India LTD
The company is incorporated under the Companies Act, 1956 and is wholly owned by the Government of India (GOI). Company’s objective is to promote the development and utilisation of the coal reserves in the country for meeting the present and likely future requirement of the nation with due regard to need for conservation of non-renewable resources and safety of mine workers.
FOOD CORPORATION OF INDIA
The Food Corporation of India was setup under the Food Corporations Act 1964, in order to fulfil objectives of the Food policy. Effective price support operations for safeguarding the interests of the farmers. Distribution of food grains throughout the country for Public Distribution System; and Maintaining satisfactory level of operational and buffer stocks of food grains to ensure National Food Security.
“Privatization is a process of transferring possession business, enterprise, agency or public service from the public sector to private sector.”
Private and public both sectors have contributed in the development of India. But both have got Short comings. The need of the hour is that both sectors should work in compatibility with each other. Rather than contrast Joint efforts of these will rush the economic development and India Will is a developed country.
1. Emphasis on non main concern industries and wastage of resources
2. Monopoly and concentration
3. Contribution to trade deficits
4. Industrial disputes
5. Industrial sickness
6. Problems relating to foreign competition
7. Problems relating to finance and credit
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