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Economics Discussion

7 Crucial Objectives of Public

Sectors in a Mixed Economy
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The following points highlight the

seven crucial objectives of public
sectors in a mixed economy.

Objective # 1. Transformation
of the Economy:
Imme​diately after attaining Independence
the Govern​ment declared that India was
going to have a so​cialist pattern of society.

The public sector was supposed to

transform the economy in such a fash​ion
that it could move towards socialism. It
was felt that if development is to proceed
at the de​sired rate and to contribute
effectively to the at​tainment of the larger
socio-economic goals, the public sector
must grow not only absolutely but also
relatively to the private sector.

Objective # 2. Redistribution of
Income and Wealth:
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It is needless to argue that the basic goal of

a social​ist pattern of society could not be
achieved with​out improving the existing
pattern of income and wealth distribution.
This is possible by raising in​comes at low
levels, while simultaneously reduc​ing it at
the top.

As J. S. Uppal has rightly com​-

mented:

“Public sector and other public policies

will seek to reduce inequalities of income
and achieve a more equitable distribution
through land reforms, ceiling on urban
property, an appropriate tax structure and
fiscal policy, channelisation of profits to
the Government, which will be spent for
welfare of the weaker sections, regulation
of in​comes of top executives in public
enterprises and discriminatory price
policies for mass consump​tion goods.”

Objective # 3. Source of Capital

Formation:
There is no denying the fact that one of the
major determi​nants of the rate of
economic growth and the pat​tern of
income and wealth distribution is the
man​ner of utilisation of profits from
business enter​prises. In private
enterprises, profits are distrib​uted largely
among shareholders who are already well-
off. This results in inequality in
distribution of income and wealth.

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In public sector enterprises, a major

portion of undistributed profit is ploughed
back for expansion or diversification (i.e.,
setting up of new enterprises to produce
new products) or, for building a strong and
viable socio-economic infrastructure for
the benefit of all. Therefore one of the
important goals of public sector
enterprises in India has been promotion of
capital formation. This has, no doubt, been
achieved to some extent.

Objective # 4. Development of
Socio-Economic Infra​-
structure:
The inadequacy, if not complete ab​sence,
of socio-economic infrastructure—espe​-
cially in basic and heavy industries and
transport and communication facilities—is
the proximate cause of economic
backwardness of LDCs. In fact, one of the
major obstacles to India’s economic
development has been the relative absence
of ba​sic and heavy industries.

Since the development of infrastructural

industries requires huge initial
investment, involves long gestation period
and yields very low initial return, private
investors turn away from such investment
projects. So it is in the rightness of things
for the public sector to develop those
industries in which private sector is unable
and unwilling to put the resources
required and undertake the risks involved.

Objective # 5. Achievement of
Balanced Regional De​-
velopment:
One of the declared objectives of the
Government of India’s industrial policy
has been to achieve balanced regional
development. So the Government has
consistently stressed the need to reduce
regional inequalities by encouraging the
location of public undertakings in
economically backward regions.

The steps taken to achieve this

objective, through public
enterprises, include:

(a) grant of credit at a concessional rate

through public enter​prises,

(b) provision of an integrated

infrastructure such as electricity, transport
and water,

(c) special consideration for setting up

public sec​tor industrial undertakings in
backward areas and preference to
backward areas in licensing of in​dustries.

Objective # 6. Reduction of
Concentration of Wealth and
Economic Power in Private
Hands:
Increased national output is not enough.
The fruits of progress must be shared by
all sections of society. To en​sure this it is
necessary to remove, or reduce, con​-
centration of wealth and economic power
in pri​vate hands. In fact, discouraging
concentration of economic power and
preventing the growth of monopolies and
big business have been the de​clared
objectives of the Government throughout
the plan period.

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The 1956 Resolution emphasised “the

urgency of reducing disparities in
income and wealth and preventing
private monopolies and the
concentration of economic power in
different fields in the hands of a
small number of persons.” Be​sides
emphasising the need to strengthen the
pub​lic sector for achieving this goal, the
resolution also called for greater equity
(and less loan) capi​tal while granting
assistance from public financial
institutions and a steady increase in the
propor​tion of activities of private sector to
be developed along co-operative lines.

Objective # 7. Attainment of
the Planned Resource
Allocation:
Finally, the public sector enterprises are
supposed to enable the planners and
policy​makers to achieve better resource
allocation, con​sistent with the
development strategies of the coun​try.
Public sector enterprises will seek to
achieve this objective by promoting the
development of small-scale and cottage
industries so as to create employment
opportunities, alleviate poverty by
producing mass consumption goods and
improve the balance of trade position
through import substitution and export
promotion.

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