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Private sector and public sector: There are different kinds of business organisations viz., small or large, industrial or trading, privately owned or government owned existing within our country. Our Indian economy is directly affected by these organisations as they become a part of the Indian economy. However, the government of India has opted for a mixed economy wherein both private and government enterprises are permitted to function. Hence the economy may be classified into two sectors viz., private sector and public sector. The private sector encompasses business owned by individuals or a group of individuals. Different forms of private sector organisation are sole proprietorship, partnership, joint Hindu family, cooperative and company. The public sector is comprised of various organisations owned and operated partly or fully by the State or Central government.

Forms of organising public sector enterprises

Government's contribution to Businesses and economic sectors of the country require organisational structure to function. A public enterprise might take any meticulous form of organisation based on the nature of its operations and their association with the government. The aptness of a particular form of organisation depends upon its requirements. The forms of organisation which a public enterprise may acquire are as follows:
  1. Departmental undertaking
  2. Statutory corporations
  3. Government companies
Departmental undertakings: These enterprises are recognized as departments of the ministry and also considered as part or an extension of the ministry itself. The Government operates its activities through these departments and the forms an essential part of the functioning of the government.

Statutory corporations: Statutory corporations can be defined as public enterprises that are brought into existence by a Special Act of the Parliament. The Act proclaims its powers and functions, rules and regulations governing its employees and its association with Government departments. This is a corporate body formed by legislature with distinct powers and functions and financially independent with a vivid control over a particular area or a specific type of commercial activity.

Government company: These companies are recognized under the Indian Companies Act, 1956. These are Government companies like all other companies in the private sector are registered and governed by the laws of the Indian companies Act. According to the Indian Companies Act 1956, a government company is the one wherein not less than 51 percent of the remunerated capital is done by the central government, or by any state Governments or partly by central Government and partly by one or more state Governments.

Changing role of public sector

During the Independence, it was projected that the public sector enterprises might play an important role in achieving certain goals of the economy also by direct participation in business or as a catalyst. However, the Indian economy is in a stage of transition. In post 90's, the new economic policies illustrated liberalisation, privatisation and globalisation. The function of the public sector was redefined. It was not supposed to perform a passive role but to actively participate and vie in the market with other private sector companies in the same industry.

Development of infrastructure

The process of industrialisation cannot be persistent without adequate transportation and communication facilities, fuel and energy, basic and heavy industries. It is merely the government that can mobilise huge capital, organize industrial construction and train technicians and workforce.

Regional balance

The government is in charge of developing all regions and states in a meticulously balanced way and removing regional disparties. Development of backward regions so as to make sure that a regional balance in the country is considered as one of the major objectives of planned development. Hence, the government had to identify new enterprises in backward areas and simultaneously, prevent the rapidly increasing growth of private sector units in advanced areas.

Economies of scale

Where large scale industries need to be set up with huge capital expend, the public sector had to intervene to take advantage of economies of scale.

Check over concentration of economic power

The public sector plays the role of a regulator to check over the private sector. With respect to private sector there are a handful of industrial houses which would be interested in investing in heavy industries as a result the wealth gets accumulated in a few hands and monopolistic practices are entertained.

Import substitution

During the period of second and third Five Year Plan, India was trying to be self-reliant in many arenas. Public sector companies involved in heavy engineering that would assist in import substitution were established.

Government policy towards public sector since 1991 Its main elements are

Streamlining and reviving potentially viable PSUs, Closedown PSUs, undertaken. Topple government's equity in all non-strategic PSUs to 26 per cent or lower if required; and fully save the interest of workers.
  1. Reduction in the number of industries reserved for the public sector from17 to 8 (and then to 3) This shows that the private sector can enter all areas (except 3) and the public sector will have to vie with them.
  2. Disinvestment of shares of a select set of public sector enterprises: Disinvestment includes the sale of the equity shares to a private sector and the public. The goal was to elevate resources and encourage better participation of the general public and workers in the ownership of these establishments. The decision of the government was to withdraw from the industrial sector and bring down its equity in all undertakings.
  3. Policy regarding sick units to be the same as that for the private sector: The Board of Industrial and Financial Reconstruction were overlooking all the public sector units to decide whether a sick unit has to be restructured or shut down.

Memorandum of Understanding

Enhancement of performance through a MoU (Memorandum of Understanding) scheme through which managements are to be approved greater autonomy but held responsible for specified results.

Global enterprises

In the past ten years MNCs have performed an important role in the Indian economy. They are identified by their huge size, large number of products, advanced technology, marketing techniques and network of operations throughout the world. Thus, Global enterprises are big industrial organisations that extend their industrial and marketing operations by means of a network of their branches in several countries.


These corporations possess distinct features that differentiates them from other private sector companies, public sector companies and public sector enterprises i.e.,
  1. Huge capital resources,
  2. Foreign collaboration,
  3. Advanced Technology,
  4. Product innovation,
  5. Marketing strategies,
  6. Expansion of market territory,
  7. Centralised control.

Joint ventures

Joint ventures may proclaim many meanings, depending on the context we are using it in. But in a wider0 sense, a joint venture can be defined as the pooling of resources and expertise by two or more businesses, to attain a particular objective. The risks and rewards of the business are also shared by them. The reasons behind the joint venture often include business expansion, development of new products or moving into new markets, especially in another country.


Business can attain unforeseen gains through joint venture with a partner. The main important benefits of joint venture are as follows:
  1. Increased resources and capacity
  2. Access to new markets and distribution networks
  3. Access to technology
  4. Innovation
  5. Low cost of production
  6. Established brand names

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