Private Sector

IN THE INDIAN PERSPECTIVE

PRIVATE SECTOR

INTRODUCTION

PRIVATE SECTOR In economics The Private sector is that part of the economy which is both run for private profit and is not controlled by the state. By contrast, enterprises that are part of the state are part of the public sector; Private , Non-Profit Organizations are regarded as part of the voluntary sector. The Private Sector of India Economy in the past few years have delineated significant development in terms of its share in the GDP. The key areas in Private Sector of Indian Economy that have surpassed the Public Sector are transport , Financial Services etc.

ROLES OF PRIVATE SECTOR Various roles played by the private sector in the General Economic Development In In In In -

Agriculture Trading Indian Economy Small Scale & Cottage Industries

ROLES IN AGRICULTURE This sector is completely managed by Private Enterprises. Contributes nearly 25% of the domestic GNP. Provides employment to nearly 60% of the working population. The size and the extent of the Private Sector in Agriculture doesn’t show the characteristics of concentration and monopoly power as are found in the Corporate Sector.

ROLES IN TRADING Trading both Wholesale and retail has always been in the Private Sector. Trading Services can be best rendered by the private sector In the field of International Trade However The government has a commanding position through the State Trading Corporation (STC) and its associate organization like the Mineral And Metal Trading Corporation (MMTC) . By and large the private sector dominates the trading sector in the country.

ROLES IN INDIAN ECONOMY Importance of Private Sector In the Indian Economy can be assessed in terms of its contribution to National Income and employment. According to the available statistics the Government Administration contributed 25% of the net Domestic product while the Private Sector contributed 75%. The share of Private Sector is dominant in Forestry, Fishing, Retail trade, Construction, transport other than

ROLES IN SMALL SCALE INDUSTRIES Small and cottage industries in India are in the Private Sector and they have an important role to play in Industrial Development. It provides for the utilization of local employment opportunities. Ensures equitable distribution of income and wealth and help in the effective mobilization of human and physical capital.

IMPORTANCE OF PRIVATE SECTOR The importance of private sector in Indian Economy has been very commendable in generating employment and thus eliminating poverty. Further , It also effected the followingIncreased quality of life Increased access to essential items Increased production opportunities Lowered prices of essential items Increased value of human capital Improved social life of the middle class Indian Decreased the percentage of people living below the poverty line

IMPORTANCE Changed the old age perception of the poor agriculture based country to a manufacturing based country. Effected increased research and development activity and spending. Effected better higher education facilities especially in technical fields. Ensured fair competition amongst market players. Dissolved the concept of monopoly and thus neutralize market manipulation practices.

Contd.. The importance of Private Sector In Indian Economy can be witnessed from the tremendous growth of Indian BPO’s, KPO’s , Indian Software Companies, Indian Private Banks and Financial Service companies. Indian BPO Sector is more concentrated with rendering services to overseas clients KPO sector is engaged in delivering knowledge based high-end services to clients.( It is estimated that out of the total US $ 15 Billion KPO service business around US $ 12 Billion of business would be outsourced to India by the end of 2010)

GROWTH OF PRIVATE SECTOR The phenomenal growth of private sector of India can be attributed to political will, financial reforms, usage of more advanced technology, young and large English speaking working class. The 7-8 % of annual GDP growth rate India is the one of the highest growth rate in the world. The last 15 years witnessed a phenomenal rise of the growth of private sector in India. The opening up of Indian economy has led to free inflow of foreign direct investment (FDI) along with modern cutting edge technology, which propelled India's economic growth.

Some positive effect of the growth of private sector in India are as follows Manufacturing registered 11.9% growth The passenger vehicles sector grew by 11.61% during April-May 2007 Electricity, gas & water supply performed well and recorded an impressive growth rate of 8.3% Construction growth rate rose to 10.7% Trade, hotels, transport and communication registered a growth rate of 12% Financing, insurance, real estate and business services recorded an impressive growth rate of at 11% during the 1st quarter of this fiscal

GROWTH Exports grew by 18.11% during the 1st quarter of 2007-2008 and the imports shoot up by 34.30% during the same period The food sector is estimated to be of US$ 200 billion and it is expected to grow to $310 billion by 2015 Merchandise Exports recorded strong growth

LIMITATIONS OF PRIVATE SECTOR Emphasis on Non-Priority Industries. Emergence of monopoly power and concentration. Industrial Disputes. Industrial Sickness

COMPARISION OF PUBLIC AND PRIVATE SECTOR Development of private sector is a comparatively slower than public sector but investment is more than public sector. The participation of the private sector of Indian economy is desired by the government of India for infrastructural development including specific sectors like power, development of highways and so on. As the contribution of public sector in these sectors have been arrested due to the shift of the attention of the Indian government to issues like population increase, industrial growth.

Share of public and private sector in net domestic product

PROSPECTS The Industrial Policy of 1991 liberalized the economy in favour of the Private Sector by removing the asset limit of MRTP companies and thus freed large business houses to undertake investments .in short, a greater role for the Private Sector is envisaged in the new Industrial Policy by removing the barriers and controls and following a more liberalized approach. The government has been taking a series of measures to give a boost to the Private sector for e.g. Allowing automatic expansion of capacity to a large number of Industries special facilities for the setting up of export oriented units, exemption from MRTP restrictions on Industries producing for export, easy Industrial Licenses for New Units located in “zero Industry” districts , quick and sympathetic processing of license applications , Liberalizations of import and pricing policies etc.