ROLE OF PIVATE SECTOR IN INDIA

In western countries and in Japan private enterprises were responsible for rapid economic development. But
communist countries replied solely on public enterprises as initiators and prime movers behind industrialization.
India attempted to combine advantages of both capitalist and socialist lines of development and in the
Industrial Policy Resolution of the government allotted a specific role to the sector in the field of industries.
The government has appreciated the dynamism of the personal of the private sector and how the private
sector can introduce new processes, new varieties, new goods etc and how it can revolutionize the entire mode
of production. Accordingly, the government has provided opportunities the private sector to develop and
expand in certain spheres of the economy.

Private Sector: General Economic Development

Even Before the independence the private sector was responsible for setting up and expansion of industries
like cotton, jute, textiles, sugar, paper, edible oils etc. From the beginning of this century the TATAs were in
forefront of Iron and steel Industries, protection given by the government during 1930s and World War
(1939-45) stimulated industrial development. But the greatest Philip given to industrialization was given by
national government after independence. The private sector was given sufficient scope to produce intermediate
goods and machines also, and as a consequence a whole range of industries producing chemicals, paints, plastics,
machine-tools, ferrous and non-ferrous metals, rubber, etc. have come up. India has become self-sufficient in
many consumer goods. The private sector has become as capable as to help other than third world countries in
their economic development

Private Sector in Agriculture

The dominant sector in India is Agriculture which consists of agriculture proper and other allied activities such
as dairying, animal husbandry, poultry etc. This sector which is completely managed by private enterprise
contributes nearly 32% of the domestic GNP and provides employment to nearly 67 per cent of the working
population From this point of view, it may be thought that the private sector is dominant in the case of
agriculture and allied occupations. But, in practice, agriculture is not run on a commercial basis and much of it
is in the hands of small and marginal farmers. Accordingly, the size and fee extent of the private sector in
agriculture does not show characteristics of concentration and monopoly power as are found in the corporate
sector.

Private Sector In Trading

Trading, both wholesale & retail always been in the private sector because the trading services can be best
rendered by private businessmen. The Government is least suited to render these services. However, under
conditions of scarcity, the private businessmen have the tendency to resort to hoarding and exploitation of the
consumers. The Government has attempted to control and regulate private trade through controls on
price, on the movement of goods between regions, on storage, etc. In 1973, the Government of India decided to
take over the wholesale trade in wheat, but the scheme fell through. In the field of international trade,
however, the Government has a commanding position through the State Trading Corporation (STC) and its
associate organization like Minerals and Metals Trading Corporation (MNTC). By and large, the private sector
dominates trading sector in the country.
Share of Public & Private Sector in Domestic Products ( %) :-

SECTOR 1998-1999

PRIVATE PUBLIC TOTAL

SECTOR SECTOR

1) Agriculture, Forestry & Fishing 98 2 100

2) Mining 21 79 100

3) Manufacturing 85 15 100

4) Electricity, Gas & Water Supply -20 120 100

5) Construction 85 15 100

6) Trade, Hotel & Restaurants 97 3 100

7) Transport, Storage & Communication 56 44 100

8) Finance, Insurance, Business sector 64 36 100

9) Community, Social & Personal Services 34 66 100

TOTAL 76 24

Private sector in the Indian economy.

The importance of the private sector in the Indian economy can be assessed in terms of its contribution to
national income and employment. According to the latest available statistics (Refer Table) for the year 1998-
99 the public sector, including Government administration, contributed 23.3 per cent of the net domestic
Product while the private sector contributed 76.7 percent. The Share of private sector is dominant in
agriculture forestry, fishing, small-scale industry, retail trade construction, transport other than railways, etc.
The 1991 census put the percentage of population working in the government sector- Public Enterprises and
Government administration- at 7% and those working in the private sector at 93%. This is the position even
after five decades of economic planning and consistent effort to give a boost to the economy by creating a
vibrant public sector. The dominance of the private sector is overwhelming and as such, the Indian economy
cannot really be called a mixed economy; much less a socialist economy.

Private sector and small scale cottage Industry

Small and cottage industries in India are in the private sector and they have an important role to play in
industrial development. They are particularly suited for the utilization of local employment opportunities, as
they are labor-intensive. Besides, they ensure a more equitable distribution of income and wealth and help in
the effective mobilization of human and physical capital. Even though private ownership and management of the
small and cottage industrial units has inherent advantages because of the profit motive and personal
initiative, the small sector has traditionally suffered from such disabilities as lack of machinery, raw
materials, credit facilities, etc. The Government has come in a big way to help the small sector directly in the
form of technical advice, purchase of machinery in a concessional higher price basis, priority in allocation of
raw materials, provision of credit etc. Indirect measure to help small sector includes reservation of certain
items for exclusive production in this sector, freedom from licensing procedures, preferences to small
entrepreneurs etc. So there is a tremendous scope for expansion of small sector in this country.