question_answer 12)

Why was public sector given a leading role in industrial development during the planning period?

Answer:

At the time of independence, Indian economic conditions were very poor and weak. There was neither much private capital nor did India have international investment credibility so as to attract foreign investment. Moreover, Indian planners did not want to be dependent on foreign capital for economic development. In such a situation, it was only the public sector that could take the initiative. The following are the reasons that explain the driving role of the public sector in (ho industrial development (i) Heavy Capital Requirement There was a need of largo amount of investment in infrastructure and heavy and basic industries for economic development Private sector in India at the eve of independence did not have the capacity to invest such a big amount. Private entrepreneurs wore not prepared to bear the risks involved in these projects which had long gestation period along with high capital investment. Thus, the government played the leading role to provide the basic framework of heavy industries and infrastructure through public sector to facilitate the private sector. (ii) Low Level of Demand After the exploitative colonial rule, the majority of Indian population was left poor arid had very low purchasing power. Consequently, there was low level of demand and so there was no inducement for private sector to undertake investment. This could result into low level of employment in private sector thereby reducing demand even more. The only way to encourage demand was by public sector investments. Thus, the public sector role was needed to Invest heavily, so as to raise the income of people that could in turn raise the demand and so on. (iii) Social Welfare Majority of Indian population was suffering from abject poverty at the inception of planning. Hence, the strategic industries and those involving social considerations could not he left to the private sector which would have operated with a profit motive rather than social welfare motive. Such industries were thus kepi under public sector.