Public and private sector

India is a mixed economy: private enterprises (owned by individuals or groups), public enterprises (owned by the government) and global enterprises (from abroad) all work side by side.

The government decided which sector could work where through its Industrial Policy Resolutions of 1948, 1956 and 1991. The 1991 policy opened many areas to private and foreign investment.

Public enterprises take three forms: departmental undertakings, statutory corporations and government companies.

A departmental undertaking is the oldest form. It is simply a department of a ministry, with no separate identity of its own. Familiar examples are the railways, defence factories and the post and telegraph services. Its aim is mainly to serve people, not to earn the most money.

Its features:

• Its money comes from the government budget, and its revenue goes back to the treasury.
• It follows the government's own accounting and audit rules.
• Its staff are government servants, recruited like other civil servants.
• It is run by the ministry, and answers to that ministry.

Merits: Parliament can control it closely; it is accountable to the public; its earnings add to the treasury; and it suits activities where national security matters.

Limitations: no flexibility in its working; delays, because decisions need ministry approval; red tape (too many rules and forms); political interference; and it is slow to respond to customers' needs.