Role of private sector

Role of private sector

1. IN GROWTH AND DEVELOPMENT ROLE OF PRIVATE SECTOR

2. PRIVATE SECTOR MEANING :- The private sector constitutes the segment of the economy owned, managed and controlled by individuals and organizations seeking to generate profit. Companies in the private sector are usually free from state ownership or control. Different types of businesses under private sector are partnership, sole proprietorship, cooperative and company.

3. Role of Private Sector DOMINANT SECTOR :- Despite the rapid progress of the public sector in the period of planning, private sector is the dominant sector in the Indian Economy . For instance , 2009-10 87% companies were in the private sector. Total companies Private sector companies 158877 138300 Share in fixed capital 25.3% Gross output 37.3% Value added 34.9% Employment 60.4 Private sector employed 7.13 million workers out of a total of 11.79 million workers while the public sector employed 4.30 million workers.

4. IMPORTANCE FOR DEVELOPMENT :- In western countries private entrepreneurs have played an important role in economic development so much. The private entrepreneur is guided by the profit motive. Responsible I ntroduction of new commodities New techniques of production Assembling the necessary plant and equipment Labour force management and organising them into going concern . Such activities help in the process of industrialisation and economic development. It was because of this reason that the industrial policy resolutions of 1948 and 1956 of the government gave immense opportunities to the private sector to expand its activities. In the new liberalised scenario, 1991 , private sector has been assigned the dominant role in industrial development.

5. EXTENSIVE MODERN INDUSTRIAL SECTOR :- A number of modern industries have been set up in the private sector. Important consumer goods industries were set up in the pre- independence period itself , like Cotton textile industry Sugar industry Paper industry Edible oil industry They were highly suitable for private sector since they ensured easily returns and require less capital. Engineering industries :- T ata iron and steel , Jamshedpur only. According to 1956 resolution , industries producing intermediate goods can be set up In the private sector . As a consequence , chemical industries like paints, plastics, ferrous and non- ferrous metals , rubber, paper etc have been set up in the private sector.

6. POTENTIALITIES DUE TO PERSONAL INCENTIVE IN THE SMALL SECTOR :- Small and cottage industries have an important role to play in the industrial field. These industries employ labour – intensive techniques and are important from the point of view of providing employment opportunities . In INDIA, all small and cottage industries are in the private sector. With the help of small capital, the small entrepreneur, uses his resources efficiently to earn maximum profit . The government has received a large number of items for production in the small scale sector . This sector is granted loans at concessional rates of interest and marketing outlets are also provided. In addition , industrial estates have been established at various places where all facilities are provided under one roof to the small scale –industries.

7. IN POST LIBERALISATION PHASE Private sector

8. 1991 The new industrial policy enunciated in 1991 abolished industrial licensing and opened up the economy considerably. As a result, the private sector registered a fast growth in the post liberalisation phase. Performance of the Corporate sector Performance of the corporate sector for most of the post liberalisation period (since 1991) has been fairly good. For example:-

9. Period Growth rate 1990-91 to 1999-2000 14% 2000-01 to 2006-07 14.2% Average rate of growth of sales Growth in G ross Profit Period Growth Rate 1990 12.5% 2006-07 20.4% After Tax Period Growth Rate 1990 11.8% 2000-01 to 2006-07 36.5%

10. Deterioration (2007-08) Period Sales Gross profit Net profit 2006-07 26.2% 41.9% 45.2% 2007-08 18.3% 22.8% 26.2% There was a precipitous decline in the mobilisation of resources through the capital market . The shrinkage in export demand that started from September 2008further effected the export intensive industries. Profitability ratio 11.4% in 2007-08 3.6% in 2008-09 There was a sharp dip in growth of sales from 18.7% to 6.3% in third quarter.

11. Growth In sales . Period (2009-10) Growth rate Third quarter 28.7% Fourth quarter 34.9% PROFIT AFTER TAX Period Rate 2008-09 to 2009-10 3.6% to 8.0% 2009-10 (4 th quarter) 8.6% Profitability ratio in 2009-10 touched to 8.2%

12. Growth Sustained The growth was sustained in all quarters of 2010-2011 and first three quarters of 2011-12 as well. In all these quarters the sales growth was almost 20% or more. Substantial rise in expenditure Substantial rise in expenditure , leads to negative rate of growth in net profit in last three quarters of 2011-12 and the first quarter of 2012-13. Net profits of 1910 companies fell by as much as 43.9% in the third quarter of 2011-12 while net profits of 2003 companies fell by 18.1% in the first quarter of 2012-13 .

13. Private Sector- Ranking in terms of income and assets Status as per the fiscal year 2019-2020 S. No . Company Assets worth 1. Reliance industries Rs.719829.00 cr. 2. Indian oil corporation Rs.215,539.11 cr. 3. ONGC Rs.373,902.10 cr. 4. State bank of India Rs.3,734,917.00 cr. 5. Tata motors Rs. 195,447.73 cr. 6. Bharat petroleum corporation Rs.87,552.17 cr. 7. Rajesh export limited Rs.15,172.75 Cr. 8. Tata steel Rs.180,561.86 cr. 9. Coal India Rs.87,644.32 Cr. 10. Tata Consultancy Service Rs.91,835.00 cr.

14. Private sector- Ranking in terms of Market Capitalisation S. NO. 1. Reliance Industries Rs. 14,72,850 Cr. 2. Tata consultancy service Rs.10,55,527 Cr. 3. HDFC Bank Rs.6,78,909 Cr. 4. HUL Rs.5,02,722 Cr. 5. Infosys Rs.47,143.168Cr. 6. HDFC Rs.3,51,555.95 Cr. 7. ICICI Bank Rs.2,76,902.79 Cr. 8. Kotak Mahindra Bank Rs.2,61,250.38 Cr. 9. HCL Technologies Rs.2,32,221.89 Cr. 10. Bharat Airtel Rs.2,31,970.3Cr.

15. OF PRIVATE SECTOR Problems

16. PROFIT GENERATION IS THE MAIN MOTIVE:- Industrialists in the private sector operate with the sole motive of maximising profits. Consequently , they are interested in investing only in those industrial sector where quick profit generation is possible. TEND TO INVEST :- Consumer goods industries IGNORE :- Investments Since lack of infrastructure and capital goods plaughed the I ndian economy after independence , while private sector was reluctant to invest in these areas, the public sector had to step in. Thus, a number of economists allege that in the initial phase of industrial development lasting for about three decades, the private sector was not willing to shoulder the responsibility of a prime mover of economic development processes.

17. FOCUS ON CONSUMER DURABLE CENTER :- Even in the consumer goods sector, the focus of the private sector is on the elite consumer groups , it is these group which have ample purchasing power. Thus, the production pattern is skewed in favour of the relatively small richer sections of the society . Result :- Production of durable goods like consumer electronics and automobiles is encouraged. Production of mass consumption good is neglected. Some economists allege that this implies the wastage of the economic surplus of the country on wastage of the economic surplus of the country on unnecessary industrial activities while the ‘ core’ economic activities suffer.

18. INFRASTRUCTURE BOTTLENECKS:- Industry surveys have found that actual power shortfalls, unscheduled power cuts, erratic power quality , delays and informal payments required to obtain new connections and very high industrial energy costs, hurt industry performance and competitiveness. Substantial power cuts have forced many units to operate their own generators. ,further increasing the cost of power for industry and reducing firm competitiveness. Second constraint :- In I ndia, currently no inter state expressways linking the major economic centres, and only 3000 km of four-lane highways . Poor riding quality and congestion result in truck and bus speeds on Indian highways that average 30-40 km an hour, about half the expected average.

19. MONOPOLY AND CONCENTRATION It is the general pattern of capitalist development that, as the economy progress, the monopoly organisations strengthened and concentration of wealth and economic power in a few hands increases. DECLINING SHARE OF NET VALUE ADDED IN TOTAL OUTPUT:- Net value added is the amount generated over and above the cost of raw materials which go to the production system after allowing depreciation charges. Many industries in private sector have reported a fall in the share of net value added in output in number of years. This fall means that the same amount of raw material has generated less output , it implies a decline in efficiency.

20. Contribution to Trade Deficit:- A large number of private sector companies have been resorting to massive imports in the post- liberalisation phase to upgrade their technology in a bid to brace up to global competition . As a result, the import expenditures have increased at a much faster rate than export earnings. This has pushed up the country’s trade deficit. Industrial Disputes :- As compared to public sector , private sector suffer form more industrial disputes. Differences and conflicts between the owners and employees regarding wages , bonus, retirement , and other issues frequently emerged . Industrial disputes often results in strikes, lockout etc. valuable man days lost and productive activities suffers.

21. Industrial sickness:- This is serious problem , confronting the small , medium and large units in the private sector . Substantial amount of loanable funds of the financial institutions is locked up in sick industrial units causing not only wastage of resources but also affecting the healthy growth in the industrial economy adversely. Period Sick units Credit amount March 2008 89,641 35,366 cr.

22. Problem relating to finance and credit :- Since the rate of capital formation in the economy is low and the capital market is an underdeveloped state, the private sector have to encounter many difficulties in arranging finances. Because of high inflationary tendencies in the economy , people are attracted towards purchasing land, gold and jewellery and are not willing to invest in industries. Threat from foreign competition :- The problem of liberalisation unleashed in 1991 has opened up the gates to foreign investors . This process of globalization and integration led to an unequal competition – a competition between giant MNC’s and a dwarf Indian Enterprises .

23. Conclusion Private sector is the base of our progress as it generates more employment opportunities , increase in the standard of living, foreign exchange earning etc. References Mishra and Puri , Indian Economy, Himalaya Publishing House, Mumbai. Tradebrains . In www. Moneycontrol.com www.walkthroughindia.com