Question

Summarise the information below without leaving key information
Economic Objectives
Public enterprises are developed to achieve economic objectives as mentioned in the plan documents of the countries. They are expected to attain the goals of planned development. Apart from this, they are meant to supplement the revenues of the state in a big way by appropriate policies and by mopping up profits. They are also meant to export domestic products and earn foreign exchange. National prestige may be their primary reason for existence, such as in the case of Nuclear Power Corporation of India.
Profitability is an important goal of a PE. Yet profits can create more problems than they are worth as these incite labour to demand higher wages and cause government ministries to ask the public sector units to pursue new social goals. If their job is to create jobs, then profitability contribution to economic development is secondary.
(iii) Social Objectives
Public enterprises are meant to generate surpluses for social welfare programmes. The fact that public enterprises provide employment opportunities to the people, even having full regard to poor and backward sections of the community, is sufficient to give them social utility. In addition, public enterprises pursue objectives of alleviating poverty. They also help in reducing disparity of income and wealth existing today.

2.4: ROLE OF PUBLIC ENTERPRISES
Public enterprises play a significant role in the economies of both developed and developing countries. In developing mixed economies they are being used as an instrument of public policy in promoting social and economic goals. The public enterprise sector has expanded considerably over the years and today in developing countries, it is very significant in terms of its coverage of economic and social activities and in terms of its share in gross capital formation, output and employment. In view of the range and diversity of public enterprises and the important role which they play in the promotion of development strategy, their efficiency is now viewed as critical to national development. The role of public enterprises can be explained under the following heads.
1. Instrument of Economic Development
Since the 1960s, most governments of developing countries have assumed responsibility for growth and for initiating the process of rapid development. Since these countries are faced with structural imbalances, the governments have been engaged in the process of structural change or adaptation, and have used public enterprises as instruments for this purpose.
The state has employed this instrument of development as an integral part of India’s goal to evolve a socialistic pattern of society. As an instrument of economic development, public enterprise attempts to play its role
(i) To achieve economic justice by controlling and regulating the principal means of production;
(ii) To prevent the accumulation of wealth;
(iii) To increase the productive investment and to promote industrial activity;
(iv) To promote the establishment of certain import-substituting and export-promoting activities in the country;
(v) To avail of foreign aid and cooperation from foreign countries;
(vi) To generate surplus resources for future development and growth;
(vii) To shift the commercial and industrial activities from the hands of capitalists or private concerns to the public sector;
(viii) To promote balanced regional development;
(ix) To utilize the human and material resources in an optimum manner;
(x) To promote savings by generating resources through appropriate public enterprise pricing.

With a view to achieving these economic objectives, which have been pronounced in the national plans or development plans, public enterprises have been mainly used. The government has assumed the responsibility for the development programmes of national or state importance which otherwise cannot be accomplished without the help of public enterprises.
Public enterprises have been found to play a leading role in directly productive areas where the size of investment required and the associated risks and uncertainties have discouraged private initiative. It acts as a brake over the artificial inflation created by the private sector by its pricing policies, and it concentrates its efforts on deflation. In this way public enterprises had facilitated the creation of a competitive environment for itself and the private sector. The emphasis on developing key sectors of economy along healthy lines led to an overall investment of about Rs. 2, 52,554 crore in the public sector undertakings (up to 31 March 2000).

Answer 1

Summary of key information

Purpose and economic objectives
- Public enterprises (PEs) are created to implement national development plans and achieve planned-development goals. They are expected to supplement state revenues by generating and remitting profits, export domestic products to earn foreign exchange, and sometimes exist for national prestige (example: Nuclear Power Corporation of India).
- Profitability is an important objective but can bring problems: higher profits may fuel wage demands and prompt governments to redirect PEs toward social goals. Where job creation is a primary mandate, profitability becomes secondary.
- PEs are also expected to generate surpluses for social-welfare programmes and provide employment—especially to poor and backward groups—helping to alleviate poverty and reduce income and wealth disparities.

Role of public enterprises
- PEs play a significant role in both developed and developing economies, especially in mixed economies where they are used as instruments of public policy to promote social and economic goals.
- Their sectoral coverage, contribution to gross capital formation, output and employment have expanded, making PE efficiency critical to national development.
- Governments have used PEs since the 1960s to address structural imbalances and lead structural change and rapid growth, often as part of a strategy to evolve a socialistic pattern of society.

Functions of PEs as instruments of economic development
PEs are used to:
1. Achieve economic justice by controlling and regulating principal means of production.
2. Prevent undue accumulation of wealth.
3. Increase productive investment and promote industrial activity.
4. Promote import-substitution and export-promotion.
5. Avail foreign aid and cooperation.
6. Generate surplus resources for future development.
7. Shift commercial/industrial activities from private capitalists to the public sector.
8. Promote balanced regional development.
9. Utilize human and material resources optimally.
10. Promote savings by generating resources through appropriate pricing.

Additional roles and effects
- Governments have relied on PEs to undertake large, risky, or strategic investments that private sector actors avoid.
- Through pricing and other policies, PEs can temper private-sector-created inflationary pressures and foster a more competitive environment.
- The public sector has attracted substantial investment—about Rs. 2,52,554 crore in public sector undertakings up to 31 March 2000.