Why was public sector given a leading role in industrial development during the planning period?
Dear Student,
After independence, Indian economic conditions were very poor and weak. There was no foreign investment and the situation was not good , India did not want to be dependent on foreign capital for economic development. In such situation only publilc sector could move ahead and take initiative
Public sector was given a leading role because of following reasons :
1) Huge Capital Requirement : There was a need of large amount of investment in infrastructure .Private sector did not have the capacity to invest such a big amount. and were not ready to take risk. Thus, the government had to play the leading role to provide the required infrastructure
2) Low Demand : As there was poverty the purchasing power of the people after indipendence was very low ,due to the exploitative colonial rule. Due to such situation there was low level of demand , there was low level of employment in public sector also which result in decrease in demand . The only way to encourage demand was by public sector investments. Thus, the public sector was needed to Invest , so as to raise the income of people to increase demand.
3) Social Welfare : Due to poverty the situation of public could not he left to the private sector which would have operated with a profit motive rather than social welfare motive.
So public sector gave a leading role in industrial development.
Regards
After independence, Indian economic conditions were very poor and weak. There was no foreign investment and the situation was not good , India did not want to be dependent on foreign capital for economic development. In such situation only publilc sector could move ahead and take initiative
Public sector was given a leading role because of following reasons :
1) Huge Capital Requirement : There was a need of large amount of investment in infrastructure .Private sector did not have the capacity to invest such a big amount. and were not ready to take risk. Thus, the government had to play the leading role to provide the required infrastructure
2) Low Demand : As there was poverty the purchasing power of the people after indipendence was very low ,due to the exploitative colonial rule. Due to such situation there was low level of demand , there was low level of employment in public sector also which result in decrease in demand . The only way to encourage demand was by public sector investments. Thus, the public sector was needed to Invest , so as to raise the income of people to increase demand.
3) Social Welfare : Due to poverty the situation of public could not he left to the private sector which would have operated with a profit motive rather than social welfare motive.
So public sector gave a leading role in industrial development.
Regards