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Why Was Public Sector Given a Leading Role in Industrial Development During the Planning Period? - Economics

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ConceptIndustry and Trade

Question

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

Solution

At the time of independence, Indian economic conditions were very poor and weak. There were neither sufficient foreign reserve nor did India have international investment credibility. In the facet of such poor economic condition it was only the public sectors that need to take the initiative. The following are the reason that explains the driving role of the public sector in the industrial development:

1. Need of Heavy Investment: There was a need of heavy investment for industrial development. It was very difficult for the private sector to invest such a big amount. Further, the risks involved in these projects were also very high and also these projects had long gestation period. Thus, the government played the leading role to provide the basic framework of heavy industries.

2. Low Level of Demand: At the time of independence, the majority of population was poor and had low level of income. Consequently, there was low level of demand and so there was no impetus for any private sector to undertake investment in order to fulfill these demands. Thus, India was trapped into a vicious circle of low demand. The only way to encourage demand was by public sector investments.

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APPEARS IN

 NCERT Solution for Ncert Class 12 Economics - Indian Economic Development (2019 to Current)
Chapter 2: Indian Economy 1950-1990
Exercise | Q: 12 | Page no. 34
Solution Why Was Public Sector Given a Leading Role in Industrial Development During the Planning Period? Concept: Industry and Trade.
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