IMPORTANCE/ADVANTAGES/ FUNCTIONS/ROLE OF PUBLIC SECTOR

IMPORTANCE/ADVANTAGES/ FUNCTIONS/ROLE OF PUBLIC SECTOR

Meaning: -In India, the sectoral organisation of business can be broadly divided into two groups—Private sector organisation and public sector organisation. Public sector plays an important role in the economic development of India. The role and importance of public sector can be briefly explained as follows:

1.      Employment: - public sector provides employment to large number of people in the country. For instance, the Indian Railways provide employment to about 15.5 lakh people, perhaps the largest employer in the world.

2.      Rural Development: - public sector units facilitate rural development. This is possible due to:

            i.  Infrastructure development, both economic and social infrastructure

          ii.  Locating Projects in rural areas like the Bokara Steel Plant, the Raurkela Steel Plant, etc.

3.      National Income: - public sector units contribute to the national income of the country. The public sector has grown in size over the years both in terms of number of units as well as in production. It is estimated that the public sector’s contribution to GDP is about 25%, and that of the private sector’s 75%.

4.      Capital formation: -The public sector contributes to capital formation by mobilisation of savings through public sector banks. The all India financial institutions like IDBI, ICICI, etc., play an important role in industrial investment and capital formation by providing medium terms and long-term funds to industry and service sector.

5.      Foreign Exchange Earnings: -The public sector enterprises have contributed to the export earnings of the country. The public sector units export a number of products like engineering goods, chemicals, minerals, metals, etc. they also export services. 

6.      Social Order: -The public sector units contribute to the social order b y providing employment to a large number of people in the country. The employment generation reduces the possibility of anti-social activities.

7.      Government Revenue: -PSUs bring revenue to the Government. The revenue is in the form of:

a.       Direct Taxes

b.      Indirect Taxes

c.       Profits of PSUs

8.      Infrastructure Development: -Public sector units play an important role in the development of the infrastructure of the nations. The public sector has developed roadways, railways, airways, power, and so on.