PUBLIC SECTOR: BANE OF INDIAN ECONOMY
Any nation can stand on world stage only on the basis of a healthy economy. For a developing country, the domestic economy depends a lot on public and private sectors. But in our country the public sector has not been performing up to the expectations. In fact, the public sector in India has been hindering rather than helping the growth of our economy. Its performance has reached such an abysmal law that they have become a national liability, in fact, efficiency is the hallmark of the private sector.
The public sector covers a major chunk of the domestic economy and in a broader context, the government departments play an important role in education, water supply, power supply, health care, etc. All the Central government departments have a significant bearing on the progress of nation putting the steps forward in this scientific age. With massive agricultural extension network, scientific and technical research facilities, the public sector’s share in Indian economy was about 30 per cent in late 80s. Then it started declining. Though public sector departments like railways, power supply undertakings, agro-industries corporation, etc., increased their share in economy about 19 per cent in 1990s, these are not impressive enough for a big nation like India.
The public sector was initially established to achieve the twin objectives of social and economic welfare. At present, most of the public sector units is working inefficiently and proving a great burden on Indian economy.
The inefficiency in the public sector loomed so large that the government had to inevitably open up this sector for private enterprises as they have shown remarkable efficiency and progress.
Our national goal is to achieve economic growth with social justice. The State-level public sector has fared no better; government-owned major and medium irrigation works have been incurring heavy losses year after year. To a considerable extent, the handicaps of the public sector have a great deal to do with the political culture because it has always been treated as an extension of government rather than as an instrument of growth. Public sector today, is treated as an instrument of concentration of power and patronage in the hands of politicians. This has a consequential impact on the work ethos and the managerial culture in most segments of the public sector, because instead of paying attention towards this sector, governments are procrastinating for saving their tenure.
India’s economic growth will largely depend on the availability of good quality infrastructure for international competitiveness and export growth. If public sector is allowed to continue its lethargic functioning, it will prove to be a major impediment for future progress. Although the managerial competence of senior public sector executives is blemishless, the environment in which they work does not allow them to be effective managers. They have the obligation to follow procedures which may be obsolete. At the same time, they have discretion to take appropriate, quick decisions, in a given situation.
Another reason for the poor performance of the public sector undertakings is that corruption is rampant all over the country. People are busy in feathering their own nests, utterly disrespectful of the wider interest of the nation. The Government invests crores of rupees on this public sector and it has all gone down the drain. Quite lamentably, the employees of public sectors are blocking the nation’s goal, working at very reduced efficiency and hence the government companies ail the Indian economy.
Now with the government facing a resource crunch, it is looking up to privatisation, to improve operational efficiency and raise additional resources. The private sector is devoid of any major flaws in terms of savings or unnecessary expense as there is higher degree of vigilance in matters related to financial expenditure. The consequences of the highly unsatisfactory performance of the public sector in financial terms have come in the form of a very large and continuing gap between the public sector’s own savings and its requirements in terms of capital formation. This is testified by the fact that the share of public sector in the savings could reach only a maximum of 27 per cent and thereafter declined to about 10 per cent in 90s. Therefore in early 90s government policies were intended towards privatisation and liberalisation. In the recent budget presented by Finance Minister Mr. Yashwant Singh emphasis was given on privatisation and opening up some units of public sector.
There is also another consequence in the form of time and the cost overruns in capital-intensive projects, which increases the debt on public sector rapidly. The crisis of 1990-91 was mainly the result of a cumulative erosion of fiscal discipline, and the public sector had a major role in this turmoil. Many claim that the government’s decision, during the earlier years of post-Independence era, to take over the sick units of the private sector was not a wise decision; it is argued that since these units were incurring substantial losses, such-loss-making units have invariably aggravated the problems of the public sector, which had to carry an extra burden in the form of such units. The public sector has negative features like mismanagement or poor management, over-staffing and lack of new technologies all of which rendered such units almost irreversibly sick.
When our domestic public sector is hindering the national economic progress, our government has no other alternative, but to seek the assistance of private and foreign investment.
It is not difficult to diagnose what ails the public sector and why this sector is a bane of Indian economy. Lack of technologies, poor working conditions, mismanagement, and interference of politicians are responsible for the downfall of the public sector. Another cause is that public sector caters to some areas which are not profit-oriented. It requires more investment in such sectors like water supply, health care, industries in rural areas, and government has to develop all the sectors; similarly, also for the welfare of its people whether they live in cities, villages or in backward areas.
Technology is the key to the future, which shall play an immensely important role in public sector. Public sector firms should have highly trained professionals, skilled and competent personnel to face the emerging competitive corporate environment. Although we do have many research and development programmes, we are yet to achieve technological excellence. Economic growth can come about only if we successfully compete with advanced countries in quality, cost and innovation. It requires motivation to achieve results.
In this era of economic reforms, privatisation etc., successive governments since 1991-92 have adopted an agenda of disinvestment of these public sectors which are nothing but a financial burden on the economy with their losses accumulating year after year. The right course is to privatise at least loss- making enterprises. The government has set a target of Rs. 12,000 crores for 2001-02 by way of disinvestment proceeds of various unviable PSU. The money thus acquired will not only reduce fiscal deficit but can be utilised from increased investment in social sectors like health, education, sanitation and infrastructure which get woefully low allocations year after year.