Chapter 6

Sectors of Business Organization

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6.1 Introduction

Public sector business played an important role in the development of our country. The concept of welfare state and the ideologies of socialism were the driving force behind setting up of state enterprises. In recent years the government is shifting form involving in business. Private sector is gradually gaining recognition in most of the business sectors. In recent years global enterprises are gaining popularity. Some of the Indian companies have already gained global recognition.

6.2 Private Sector and Public Sector

In India, public sector enterprises have been increasing in number since independence. During the initial years of independence, public sector had been considered the key to economic liberation of the nation after decades of foreign occupation. Such high hopes have faded when tested against the prevailing realities in the country. Intellectuals in the country realized right from the 60s that our public sector experiment was a big flop. But it was a convenient tool to nurture the dreams of the poor and the pockets of the corrupt. Thus we contributed several great ideas to the world as to why we should continue to feed the public sector from the tax payers’ money. Some of those wonderful ideas are discussed below:

6.2.1 Rationale of Public Sector

i) Defence requirements

Investment in public sector was essential to make sure continuous supply of goods and services for the defense forces of our country. Strategic supply cannot be left to the private sector. American army depends almost entirely on private sector for their defense supply. We cannot make such mistakes.

ii) Basic and heavy industries

Basic and heavy industries require huge capital. Private sector cannot make such huge investments. Private sector is less interested in such enterprises because these industries generate return very slowly.

[Tata started steel factory in 1907, which is running very well. It was during British time, so we could not stop them.]

iii) Public utilities

Public utility services such as water supply, electricity, gas and public transportation do not generate high profits. Public sector enterprises are essential to provide these services.

iv) Preventing concentration of economic power and monopolies

Concentration of economic power in the hands of a few is an undesirable situation. Creation of monopolies is another bad effect in the economy. Government took over some of the private sector companies to prevent concentration of economic power and creation of monopolies.

v) Infrastructure

Private sector is not interested in infrastructure development industries. Infrastructure such as transport, power, roads, and communication networks are essential for the development of other industries. Private sector is less committed to such social causes. They are interested only in business activities that can generate quick profit on their investment. It becomes the duty of the government to invest in these industries to ensure improvement in standard of living.

vii) Development of backward regions

When a private businessman selects a place for setting up a business, his first consideration is the success of the business. Noble ideas like development of the country and welfare of the people are not the guiding principle for the private sector investor. Government is the only investor who can afford to start a business purely for development of backward regions.

viii) Financing of economic development and full employment

Employment generation is another aim of public sector business. In fact many of the public sector industries are doing only employment generation.

ix) Socialist pattern of society

Socialism was the dream of 20^th century. Socialistic ideologies basically require all the means of production owned by the government. They were really great dreams, state owned businesses giving the highest salaries to workers, supplying the best products to customers and charging lowest price for goods and services, and finally as icing on the cake the whole profit going to the government treasury to enrich the country. It took almost half a century for India to wake up from this dream and by that time the rest of the world had gone far ahead.

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