Public Sector was developed to initiate process of self-reliant economic growth. Comment.

Answer: Across the world, post the Second World War, there was a drive to nationalize core industries such as coal, iron and steel, electricity, gas, ship-building and similar industries which were deemed important for overall development of the nation. It was believed that social welfare could be best achieved only by the government running these critical industries.
The public sector which was thus born obtained protection through government created monopolies, entry barriers and quota systems. Post the 1980s oil shocks, it became clear that the government should not venture into areas which can be performed efficiently by the private sector. The state serves its purpose better as a regulator and facilitator rather than as a producer (Majumdar, 1998). It was widely accepted across countries that the public sector did not optimize efficiency of capital utilization and productivity. The PSEs were established in areas where the private sector was not able to make investments like the integrated steel plants established after independence. Public Sector was developed to initiate process of self-reliant economic growth. The financial performance of PSEs began to deteriorate and various attempts such as performance contracts through Memorandum of Understandings (MOUs) did not meet with success.

This situation was sustained for a few years which saw the growth of public sector deficiencies (Majumdar, 1998). Hence, a decision was taken in 1991 to follow the path of Disinvestment.

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