There are all kinds of business organisations - small or large, industrial or trading, privately owned or government owned existing in our country. These organisations affect our daily economic life and therefore, become part of the Indian economy.
The Government of India has opted for a mixed economy, where both private and government enterprises are allowed to operate. The economy, therefore, may be classified into two sectors: private sector and public sector. The private sector consists of business owned by individuals or a group of individuals. Various forms of organisation are sole proprietorship, partnership, joint Hindu family, cooperative and company. The public sector consists of various organisations owned and managed by the government. These organisations may either be partly or wholly owned by the Central or State government.
Forms of organising public sector enterprises: Government’s participation in business and economic sectors of the country needs some kind of organisational framework to function. A public enterprise may take any particular form of organisation depending upon the nature of it’s operations and their relationship with the government. The suitability of a particular form of organisation would depend upon its requirements. The forms of organisation which a public enterprise may take are as follows:
- Departmental undertaking
- Statutory corporation
- Government company
Changing role of public sector: At the time of Independence, it was expected that the public sector enterprises would play an important role in achieving certain objectives of the economy either by direct participation in business or by acting as a catalyst. The Indian economy is in a stage of transition. In the post 90’s period, the new economic policies emphasised liberalisation, privatisation and globalisation. The role of the public sector was redefined. It was not supposed to play a passive role but to actively participate and compete in the market with other private sector companies in the same industry.
Development of infrastructure: The process of industrialisation cannot be sustained without adequate transportation and communication facilities, fuel and energy, and basic and heavy industries. It is only the government which could mobilise huge capital, coordinate industrial construction and train technicians and workforce.
Regional balance: The government is responsible for developing all regions and states in a balanced way and removing regional disparties. Development of backward regions so as to ensure a regional balance in the country is one of the major objectives of planned development. Therefore, the government had to locate new enterprises in backward areas and at the same time prevent the mushrooming growth of private sector unit in already advanced areas.
Economies of scale: Where large scale industries are required to be set up with huge capital outlay, the public sector had to step in to take advantage of economies of scale.
Check over concentration of economic power: The public sector acts as a check over the private sector. In the private sector there are very few industrial houses which would be willing to invest in heavy industries with the result that wealth gets concentrated in a few hands and monopolostic practices are encouraged.
Import substitution: During the second and third Five Year Plan period, India was aiming to be self-reliant in many spheres. Public sector companies involved in heavy engineering which would help in import substitution were established.
Government policy towards public sector since 1991. Its main elements are: Restructure and revive potentially viable PSUs, Close down PSUs, which cannot be revived. Bring down governments equity in all non-strategic PSUs to 26 per cent or lower if necessary; and fully protect the interest of workers.
Memorandum of Understanding: Improvement of performance through a MoU (Memorandum of Understanding) system by which managements are to be granted greater autonomy but held accountable for specified results.
Global enterprises: In the last ten years MNCs have played an important role in the Indian economy. They are characterised by their huge size, large number of products, advanced technology, marketing strategies and network of operations all over the world. Global enterprises thus are huge industrial organisations which extend their industrial and marketing operations through a network of their branches in several countries.
Features: These corporations have distinct features which distinguishes them from other private sector companies, public sector companies and public sector enterprises i.e., (i) Huge capital resources, (ii) Foreign collaboration, (iii) Advanced Technology, (iv) Product innovation, (v) Marketing strategies, (vi) Expansion of market territory, (vii) Centralised control.
Joint ventures: Joint ventures may mean many things, depending upon the context we are using it in. But in a broader sense, a joint venture is the pooling of resources and expertise by two or more businesses, to achieve a particular goal. The risks and rewards of the business are also shared. The reasons behind the joint venture often include business expansion, development of new products or moving into new markets, particularly in another country.
Benefits: Business can achieve unexpected gains through joint ventures with a partner. The major benefits of joint venture are as follows: (i) Increased resources and capacity (ii) Access to new markets and distribution networks (iii) Access to technology (iv) Innovation (v) Low cost of production (vi) Established brand name.
Public Private Partnership: It is a relationship among public sector and private sector for allocation and completion of development projects.