February 26, 2019

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  • Private Sector

The private sector consists of business owned by individuals or a group of individuals.

  • Public Sector

The public sector consists of various organisations owned and managed by the government.

  • Forms of organizing Public Sector Enterprises


  • Departmental Undertaking: This is the oldest and traditional form of organizing public sector enterprises. It is organized , financed and controlled in much the same way as any other government department.


Features Merits Limitations
Funding from govt. treasury Full govt. control Bureaucratic control
subject to accounting

and audit controls applicable to other Government activities

Complete secrecy Lack of incentives
Employees are govt. servants Proper use of public money Red tapism
Subdivision of govt. department Generation of revenue Inflexibility of operations
Accountable to ministry Socio-economic objectives Financial dependence


  • Statutory Corporations

It is a body corporate set up under a special Act of the parliament or of the state legislature.

Features Merits Limitations
Established under a special statute Internal autonomy Corruption
Separate legal entity Quick decisions Lack of competition
Owned by govt. Economies of scale Nominated board
Service motive Efficient management Rigid structure
Financial Autonomy Parliamentary control Abuse of monopoly


  • Government Company

A company in which not less than 51 percent of the paid up share capital is held by the central govt. or by one or more state govt. or jointly by the central or state govt. is called a govt. company.

Features Merits Limitations
Incorporated under companies Act Easy Formation Lost relevance of Companies Act
Separate legal entity Internal autonomy Evades constitutional responsibility
Owned by govt. at least to the extent of 51% Flexibility of operations Autonomy in name
Own staff Expert management
Financial autonomy Collaboration with private sector or foreign countries


  • Changing Role of Public Sector
  • Development of infrastructure
  • Regional balance
  • Economies of scale
  • Check over concentration of economic power
  • policy towards the public sector since 1991
  • Reduction of no. of industries reserved for the public sector from 17 to 8 (and then to 3)
  • Disinvestment of shares of public sector enterprises
  • Referring of sick public units to BIFR
  • Memorandum of Understanding (granting management more autonomy)
  • Global Enterprises

It refers to a business enterprise that operates in more than one country. It is also known as Multinational enterprise.

Features of Global enterprise
Giant size
International operations
Centralised control
Sophisticated technology
Product innovation
Professional management
International markets
Aggressive marketing strategies
Foreign collaboration


  • Joint Venture

It refers to an enterprise set up jointly by two or more business concerns.


Merits Limitations
Greater resources and capacity Both parties want to have majority stake
Access to advanced technology Legal restrictions on foreign investment
Access to new markets Difference in cultures
Low production costs Lack of coordination


  • Glossary

Public sector: It refers to enterprises owned by Govt.

Departmental undertakings: They are established as departments of ministry.

Statutory corporations: They are public enterprises brought into existence by a Special Act of the Parliament.

Government company: These companies are established under the Indian

Companies Act, 1956.

Regional balance: Removing regional disparties.

Memorandum of Understanding: A system by which managements are to be granted greater autonomy but held accountable for specified results.

Global enterprises: Enterprises operating in more than one nation.




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