MBA 1st Year Different Sectors of Indian Economy Study Material Notes
MBA 1st Year Different Sectors of Indian Economy Study Material Notes: In this post, we will learn about MBA 1st Year Different Sectors of Indian Economy Study Material Notes. In MBA 1st Year there is one of the most important questions comes from Economic System. You will learn about MBA 1st Year Different Sectors of Indian Economy Study Material Notes. MBA is a process of development.
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Different sectors of the Indian Economy
There are three sectors in the Indian Economy, i.e. private sector, public sector, and joint sector. When productive resources are owned, managed, and controlled by private enterprises, it is called the private sector and when they are owned, managed, and controlled by the state, it is called the public sector and when resources are owned, managed, and controlled by both jointly, it is called as a joint sector.
Private Sector or Privatisation: When the ownership, management, and control of the business and industrial enterprises are in the hands of private enterprises, it is called private sector or privatization. However, it should not be understood that private enterprises work freely without any government control or regulation. The government controls and regulates the activities of private enterprises through various policies and acts. (MBA 1st Year Different Sectors of Indian Economy Study Material Notes)
In a narrow sense, privatization implies the introduction of private ownership in publicly owned enterprises, but in a broader sense, private ownership is the induction of private management and control in public sector enterprises.
Privatization is the general process of involving the private sector in the ownership or operation of a state-owned enterprise.’
Thus, privatization covers three types of measures:
- The measures which transfer ownership of public enterprises fully or partially to the private sector.
- Leasing or restructuring.
- Injecting the spirit of commercialization in public sector units.
Forms of Privatisation: The privatization may take the following forms:
- To appoint private entrepreneurs as franchise dealers for public sector industries,
- To give public assets on lease to private entrepreneurs.
- To permit new enterprises in the private sector.
- To invite private entrepreneurs to participate in the sector which is reserved for the public sector.
- To disinvest the shares of public sector units.
Merits of Private Sector or Privatisation
Merits or benefits derived from the private sector can be discussed as follows:
- The incentive for Greater Efficiency and Hard Work: Private sectors inspire both enterprises and workers to become more efficient and do more work. The entrepreneurs try to get maximum output to get maximum profit and workers try to achieve maximum efficiency for more remuneration. (MBA 1st Year Different Sectors of Indian Economy Study Material Notes)
- Increase in Productivity and Production: As both, the entrepreneurs and workers try to work with the greatest efficiency, the result is that the productivity of all the resources of production increases considerably.
- Efficient Utilisation of Resources: All the resources of production are used most economically. No part of these resources is allowed to waste. These resources are utilized to the maximum extent.
- Minimum Cost of Production: As the private sector encourages maximum and most efficient utilization of resources, it results in maximum cost of production. (MBA 1st Year Different Sectors of Indian Economy Study Material Notes)
- Higher Capital Formation: Private entrepreneurs try to save a major part of their income so that they may invest it in their business, in order to earn more income in the future and save more. This all leads to a higher rate of capital formation.
- The incentive to Take Risk and Bear Uncertainty: Private sector provides due incentives to undertake enterprise and bear risks. Enterprises introduce new innovations. These all lead to further development.
- Economic Growth and Affluence: It has promoted rapid economic growth. Many countries of the world have become rich and affluent on the basis of success achieved by their private sector enterprise. Due to this, the standard of living of the people of these countries has also increased. (MBA 1st Year Different Sectors of Indian Economy Study Material Notes)
- Helpful in the Development of Public Sector: Public sector and private sector are closely interrelated. How the growth of the private sector is helpful in the development of the public sector can be seen in the following points:
(a) Reducing the burden of loss-making public sector units. Making public sector units more competitive.
(b) Enable profit-making public sector units to modernize and diversify their business.
(c) Enable the government to increase investment in remaining public units
Demerits of Private Sector or Privatisation
Various disadvantages or demerits of privatization are as follows:
- The concentration of Income and Wealth: Privatisation encourages the concentration of income and wealth in the hands of a few persons. It makes the rich moron rich and the poor poorer.
- Class Struggle: Private sector encourages class struggle. It divides society into two classes the rich and the poor.
- Economic Instability and Unemployment: Private sector causes instability and unemployment As a result of the free working of the market mechanism, sometimes there is depression and sometimes there is inflation
- Social Welfare is Ignored: Under privatization, only those goods and services are produced which provide higher profit and are distributed according to the paying capacity of people rather than their needs and desires.
- Wastage Due to Competition: A large number of financing resources are wasted in competitive advertising. Business firms spend large amounts of money on advertisements.
- The decline of Competition: Free competition is an important characteristic of the private sector. But in the real world, we find oligopoly and monopoly. As a result, competition is declined.
Co-existence of Private and Public Sectors for the Real Economic Development
Public and private sectors are not contrary to each other, the coexistence of both is essential for the real economic development of a country and particularly for underdeveloped countries like India. In the Indian economy, both sectors work together and undertake the work of production and distribution. In the industrial policy of 1956, heavy and important industries have been assigned to the public sector and the remaining industries have been left for private sector enterprises. It helps in balanced development,
Co-existence of both the public sector and the private sector helps in achieving balanced and rapid growth. Government establishes and develops capital and basic industries while the other hand, the private sector establishes consumer goods industries, such as railways, roads, powers, etc. (MBA 1st Year Different Sectors of Indian Economy Study Material Notes)