Public Sector Policies & Issues in Management Assignment Essay

The part of the economy concerned with providing basic government services. The composition of the public sector varies by country, but in most countries the public sector includes such services as the police, military, public roads, public transit, primary education and healthcare for the poor. The public sector might provide services that non-payer cannot be excluded from (such as street lighting), services which benefit all of society rather than just the individual who uses the service (such as public education), and services that encourage equal opportunity. Public sector as a boon (1) Employment: Various public sectors operating in India needs lot of manpower & this provide employment to unlimited individuals according to their education, experience & abilities. (2) Economic Development: Economic development mainly depends upon industrial development. Heavy & basic industries like iron & steel, shipping, mining, etc. are required for supplying raw materials to small industries. Huge capital is required for establishment of such heavy & basic industries. This capital required for these industries is easily & readily made available by public sector but it is practically not possible for a private sector to run these industries. (3) Sound Infrastructure: Rapid industrial growth in a country needs sound infrastructure. Infrastructural industries require huge capital for construction of Roads, Railways, Electricity & many such industries. Private sector is unable to have such huge capital & that also without any high return but public sector can easily afford to provide all infrastructural facilities. (4) Protection to Sick Industries: Public sector, to prevent sick unit closing down, takes over their responsibility & prevent many people from getting unemployed not only this but it prevents unnecessary locking of capital, land, building, machinery, etc. (5) Regional Development: Private sector usually neglect backward area. But public sector organizations set up their units in economically backward areas. By this public sector removes regional imbalance & brings regional development. (6) Government Control: Public sector is wholly controlled & managed by the Board of Directors or other officers appointed by government. (7) Service Motive: Public sector organizations are working with the only motive of providing public utility services to society at large irrespective of profit. (8) Monopoly: Public sector is purely government monopoly. It does not face any type of competition from any private sector. Public sector is working on monopoly, semi-monopoly or oligopoly basis. (9) Modal Employer: Like a good parent, public sector is very much concerned with its employees. It take proper care of its employees & provides job security, sound wages, proper working conditions, training and welfare facilities. (10) Economies of Operation: Public sector due to its large scale operations enjoys economies of large scale operation. Public sector as a bane (1) Inefficiency: Inefficiency results due to the size of the organization. (2) Incentives: There is a lack of incentive for employees to perform if there is no share in the profit or there is an absence of other motivators such as productivity bonuses – accelerated promotion; (this factor can also apply in the private sector if the employee is not given any incentive to perform). (3) Interference: Political interference can occur. They interfere with the free market forces. Hence, Public sector is a Boon to the Indian economy. The Public Sector Enterprises have been the mainstay of the Indian economy and were set up with the purpose to achieve self-sufficiency in production of goods/ services serve the broad macro-economic objectives of higher economic growth facilitate long term equilibrium in balance of payments and Ensure stability in prices and create benchmarks for prices of essential items The government-owned corporations play a pivotal role in the economic development of emerging economies because their participation is higher in the industrial and commercial activities of these economies. Resource constraints and limited scope of the private sector in the early stages of development and planning have set the stage for predominance of the public enterprises in these economies. Thus, public sectors in the leading developing countries of the world (including the countries in the BRIC region) play a very important role. Investments in public sector enterprises have also been greater and have continued to accelerate growth in core sectors of a developing economy (such as railways, telecommunications, nuclear power, defence etc. ). Many a times, public enterprises were created to operate in areas of national and international trade, consultancy, inland, and overseas communication and construction services; as a result, overall profits of the public sector have not been restricted to certain sectors. In other words, the public sector is a heterogeneous combination of basic infrastructure industries, industries engaged in providing trade services, consumer goods industries, etc. Role and Relevance of public Vs private sector in current economic scenario In the earlier lessons you have studied about the various forms of business organization existing under private ownership or in private sector. By private sector, we mean, economic and social activities undertaken privately by a single individual or group of individuals. They prefer to do business in private sector basically to earn profit. On the other hand public sector refers to economic and social activities undertaken by public authorities. The enterprises in public sector are set up with the main aim of protecting public interest. Profit earning comes next. Besides the difference in the objective, the enterprises in both these sectors also differ in many other aspects. In this section let us know the differences between the enterprises of public sector and private sector. Role of Central Public Sector Enterprises Infrastructure: Public sector has made a very valuable contribution in the development of a strong infrastructure and the provision of social and economic overheads, which is an essential precondition for rapid economic growth. This includes development of transport and communication, power, irrigation, education, research and training public health services, housing etc. Strong Industrial Base: Public sector has also made a notable contribution in laying the foundation of strong industrial base. The development of basic and key industries, has all along taken place in the public sector, These industries include iron and steel, heavy machinery, heavy engineering, heavy electronics, heavy chemicals, minerals and oil, cement, fertilizers, etc. The development of these industries in the public sector has laid the foundation of a strong rapid and broad-based industrial growth and has enabled the country to attain self-reliance in a number of industrial items. Export Promotion: Some public enterprises have done much to promote Indian exports. The state trading corporations and the minerals and metals trading corporations have done a wonderful job of promoting exports in all parts of the world. Hindustan steel ltd, the Bharat Electronics ltd are some of the public enterprises which are exporting increasing proportion of their output and earning foreign exchange. Role of Private Sector Enterprises The private sector is usually composed of organizations that are privately owned and not part of the government. These usually includes corporations (both profit and non-profit), partnerships, and charities. The importance of private sector in Indian economy has been very commendable in generating employment and thus eliminating poverty. Further, it also effected the following – Increased quality of life Increased access to essential items Increased production opportunities Lowered prices of essential items Increased value of human capital Improved social life of the middle class Indian Decreased the percentage of people living below the poverty line in India Changed the age old perception of poor agriculture based country to a rising manufacturing based country Effected increased research and development activity and spending Effected better higher education facilities especially in technical fields Ensured fair competition amongst market players Dissolved the concept of monopoly and thus neutralized market manipulation practices Basis of difference Private sector enterprises Public sector enterprises 1. Objective Maximisation of profit. Maximise social welfare and ensure balanced economic development. 2. Ownership Owned by individuals. Owned by Government. 3. Management Managed by owner and Managed by Government. professional managers.