Geography Reference
In-Depth Information
or failing private sector firms into the public sector. Fourth, state ownership was
intended to ensure that certain strategic sectors remained in public hands and
worked for general social welfare; and finally, state enterprises were used to
develop the economy in terms of diversifying its sectoral output, promoting
development in regions that were hitherto industrially backward, creating jobs,
and bringing low cost goods to the domestic market.
Government involvement in industry became deeper and broader throughout
the subsequent decades. In addition to the handful of strategic sectors that were
initially reserved for the public domain, the public sector proliferated due to the
creation of new enterprises and the nationalization of private firms. It also
diversified its output to the extent of producing textiles, footwear, leather goods,
bread, television sets, and bicycles.
In addition to managing myriad large and small SOEs, the government created
a regulatory environment, famously described as the 'license-permit Raj', that
constrained private capital and tied it to the government as well. The SOE sector
continued to expand under the leadership of Nehru's daughter, Indira Gandhi,
and it was not until large-scale fiscal and balance of payments crises erupted in
the late 1980s that the governing élites took steps to limit the construction of new
public sector units.
Even from some stalwart proponents of market-reform there is a grudging
recognition that the Indian public sector was successful in accomplishing a
handful of the tasks for which it was intended. In a matter of a few decades the
Indian economy had developed large industries and multiplied the number of
goods produced domestically. On the other hand, critics suggest that some items
on the agenda, like protecting labor, were almost too successfully accomplished.
Unfortunately, the result was the creation of a labor aristocracy in the public
sector that did not contribute to any meaningful redistribution and stunted job
growth.
Table 1
provides data on the growth of public enterprises under the direct
control of the central government. What becomes clear from examining the growth
trajectory of the public sector is that the decision to privatize was a sudden one;
the public sector continued to grow in terms of investments and number of firms
until one year after the new economic agenda was unveiled in 1991. Since the
adoption of the new policies, the public sector has stagnated, and although the
central government publicly advocated liberalization, privatization in India has
not proceeded apace.
The multiplication of public sector enterprises under the direct control of the
central government proceeded in tandem with the development of public
enterprises at the state level. Estimates of the total number of state level public
enterprises range from 755 to 954 to 1,100.
21
The data on state level public
enterprises (SLPEs) are far more sparse and unreliable than those available for
CPEs. However, the general perception of state level enterprises is that they
