With reference to the functions of Public Sector in India, which of the following statements is/are correct ? I. To provide public utility resources II. To build social and economic overhead capital III. To ensure balanced regional and sectoral growth IV. To pursue egalitarian goals Select the correct answer using the codes given below :
- (a)I, II and III are correct
- (b)II, III and IV are correct
- (c)I, II, III and IV are correct
- (d)I, III and IV are correct
Correct — C, I, II, III and IV are correct. All four are standard functions assigned to the public sector in India's mixed economy, and all four are traceable to the Industrial Policy Resolution of 1956 and the Nehru-Mahalanobis strategy of the Second Five Year Plan. (I) Public utilities — railways, electricity, water supply, posts — are natural monopolies with huge sunk costs where a private supplier would either not enter or would price as a monopolist, so the State provides them. (II) Social and economic overhead capital means the foundations on which private production stands: power, transport, irrigation, ports, steel and heavy machinery on the economic side, health and education on the social side. These have long gestation periods, heavy capital requirements and returns that are diffused across the whole economy rather than captured by the investor, which is why private capital in the 1950s would not build them. (III) Balanced regional and sectoral growth: public investment was deliberately used to carry industry to less-developed regions — the Second Plan's steel plants at Bhilai, Rourkela and Durgapur are the textbook illustration — and to fill the gaps in the industrial structure, above all the capital-goods sector that private industry had neglected. (IV) Egalitarian goals are not an add-on but a constitutional directive: Article 39(b) and (c) of the Directive Principles require that ownership and control of the material resources of the community be so distributed as to subserve the common good, and that the economic system should not result in concentration of wealth and means of production to the common detriment. Public ownership of the commanding heights was the instrument chosen to give effect to that. Since no listed function is foreign to the public sector, the code covering all four is the answer.
- (a)I, II and III are correct — Drops IV. Egalitarian objectives — reducing disparities in income and wealth and preventing the concentration of economic power — were written into the Industrial Policy Resolution 1956 and flow from Articles 38 and 39 of the Directive Principles; they are among the core justifications for having a public sector at all.
- (b)II, III and IV are correct — Drops I. Supplying public utilities is the oldest and least contested function of the State in any economy: railways, posts, power and water are natural monopolies where competitive private provision either fails or exploits.
- (d)I, III and IV are correct — Drops II, which is the heart of the Second Plan's logic. Building social and economic overhead capital — power, transport, irrigation, steel, health, education — was precisely what the public sector was expanded to do, because these investments have long gestation and returns that private investors cannot appropriate.
India after 1947 chose a mixed economy in which the State was to occupy the 'commanding heights'. The Industrial Policy Resolution of 1956 gave that choice its architecture: Schedule A listed seventeen industries whose future development was the exclusive responsibility of the State, Schedule B listed twelve in which the State would increasingly participate alongside private enterprise, and everything else was left to the private sector. The reasoning was partly economic — capital was scarce, private enterprise was unwilling to fund heavy industry and infrastructure with long gestation, and utilities were natural monopolies — and partly constitutional, since Articles 38 and 39 of the Directive Principles commit the State to reducing inequalities and preventing the concentration of economic power. The public sector operates through three organisational forms: departmental undertakings (for example the Railways), statutory corporations created by an Act, and government companies registered under the Companies Act.
This is a 'find the odd one out' question with no odd one in it. Test each statement against the question actually asked — the FUNCTIONS the public sector was meant to perform, not how well it performed them. Candidates who have absorbed the post-1991 critique of loss-making PSUs are tempted to strike out IV as rhetoric, or I as obsolete now that private companies generate power and run telecom; but the question asks what the public sector is for, and on that both are textbook. Once you notice that every statement corresponds to a clause of the Industrial Policy Resolution 1956 or of the Directive Principles, the all-four code follows. Present-day note: since 1991 the reserved list has been cut back drastically, PSUs are graded Maharatna, Navratna and Miniratna, disinvestment is routine, and the Government's public sector enterprise policy announced in 2021 confines State ownership to a small set of strategic sectors — but these four remain the classical rationale taught for the public sector's existence.
- The Industrial Policy Resolution, 1956 made the public sector the 'commanding heights' of a mixed economy: Schedule A reserved 17 industries exclusively for the State, Schedule B listed 12 in which the State would progressively participate, and the rest was left to private enterprise.
- Articles 39(b) and 39(c) of the Directive Principles require that material resources be distributed to subserve the common good and that the economic system not concentrate wealth and the means of production — the constitutional basis of the egalitarian function.
- Public utilities such as railways, posts, electricity and water supply are natural monopolies with heavy sunk costs, the classic case for public provision.
- 'Social and economic overhead capital' means power, transport, irrigation, ports, steel and heavy machinery together with health and education — long-gestation investments whose returns spread across the economy.
- The Second Five Year Plan's public steel plants at Bhilai, Rourkela and Durgapur were sited to spread industry beyond the existing industrial belts — the balanced-regional-growth function in practice.
- The public sector operates in three organisational forms: departmental undertakings, statutory corporations and government companies.
- Since the New Industrial Policy of 1991 the reserved list has been progressively cut, PSUs are classified Maharatna, Navratna and Miniratna, and disinvestment is handled by DIPAM — the functions above remain the classical justification, not a description of current policy.
Every listed function is a genuine one, which is why the answer is the code covering I, II, III and IV.
- Striking out statement IV because 'egalitarian' sounds like political rhetoric — it is a Directive Principle and an explicit objective of the Industrial Policy Resolution 1956.
- Answering on performance rather than function: whether PSUs achieved balanced regional growth is a different question from whether it was one of their assigned functions.
- Equating the public sector with PSU companies alone and forgetting departmental undertakings and statutory corporations.
- Reading post-1991 disinvestment as having abolished these functions — the policy mix changed, the classical rationale is still what is examined.
UPPSC asks the public sector as a list of functions or objectives to be validated; UPSC prefers the policy edge — why the Government disinvests, where disinvestment proceeds go, and which constitutional provision carries the welfare-state ideal.
Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)? 1. The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt. 2. The Government no longer intends to retain the management control of the CPSEs. Which of the statements given above is/are correct?
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Answer(d) Neither 1 nor 2
The same subject from the other end — why the State holds, and sells, equity in public enterprises. UPSC's answer turns on the fact that in minority-stake sales the Government keeps management control, which is only intelligible if you know what the public sector was created to do.
The ideal of ‘Welfare State’ in the Indian Constitution is enshrined in its
- (a) Preamble
- (b) Directive Principles of State Policy
- (c) Fundamental Rights
- (d) Seventh Schedule
Answer(b) Directive Principles of State Policy
The constitutional source of statement IV — the egalitarian, welfare-state objective the public sector was built to serve lives in Part IV, above all Articles 38 and 39.
Given below are two statements, one is labelled as Assertion (A) and other as Reason (R): Assertion (A): Government has launched the 'National Infrastructure Pipeline (NIP)' for period of 2020-30. Reason (R): The objective of NIP is to provide equitable access to infrastructure for all. Select the correct answer using the codes given below. Codes:
- (a) Both (A) and (R) are true and (R) is the correct explanation of (A)
- (b) Both (A) and (R) are true but (R) is not the correct explanation of (A)
- (c) (A) is true but (R) is false
- (d) (A) is false but (R) is true
Answer(d) (A) is false but (R) is true
Statement II in its contemporary form — public investment in economic overhead capital, with equitable access to infrastructure as its stated objective, is the same function the 1956 policy assigned to the public sector.
- practice — not a real PYQ
Under the Industrial Policy Resolution of 1956, the industries whose future development was to be the exclusive responsibility of the State were listed in
- (a)Schedule A
- (b)Schedule B
- (c)Schedule C
- (d)Schedule D
Answer(a) Schedule A — it listed 17 industries reserved exclusively for the State; Schedule B listed 12 in which the State would progressively participate, and the remaining industries fell to the private sector.
- practice — not a real PYQ
The egalitarian objective of the public sector in India — preventing the concentration of wealth and the means of production — draws most directly on which part of the Constitution?
- (a)Fundamental Rights, Article 19(1)(g)
- (b)Directive Principles, Article 39(b) and (c)
- (c)The Seventh Schedule, Union List
- (d)The Preamble alone
Answer(b) Directive Principles, Article 39(b) and (c) — they require material resources to be distributed to subserve the common good and the economic system not to result in concentration of wealth and means of production to the common detriment.