Critically Examine the performance of public sector in Indian economy.

Question

Ghissu Editorial · Accepted Answer

India's public sector built a strategic industrial base in steel, coal and defence and served social goals, but low capacity use, losses and bureaucratic control weaken its performance. In Andhra Pradesh, SPSEs formed 6.69% of GSDP in 2022-23, yet 90 of 103 working SPSEs had arrears in accounts.

**Introduction**

Public sector undertakings (PSUs) continue to play a crucial role in India’s economic growth and strategic autonomy, especially in states like ==Andhra Pradesh⟦4⟧⟦3⟧⟦2⟧⟦1⟧== where they significantly impact the economy.

**Achievements and Shortcomings**

SKETCH: mindmap | Public Sector Performance Dimensions
- Economic Contribution
- Operational Efficiency
- Social Impact

1. **Defence PSUs and Strategic Reforms⟦5⟧**: Defence PSUs have evolved into indigenous powerhouses, with production at ₹1.27 lakh crore⟦6⟧ (FY 2023⟦7⟧-24) and exports of ₹23,622 crore (FY 2024⟦8⟧-25), institutionalizing Atmanirbharta under DAP 2020.  
2. **Coal PSUs Drive Output and Fiscal Health**: Coal PSUs produced 1047.57 MT in FY 2024-25, cutting imports and boosting fiscal resources.  
3. **Operational Challenges in Andhra Pradesh SPSEs**: In ==Andhra Pradesh==, SPSEs form 6.69% of GSDP but face arrears in 90 of 103 SPSEs and power sector losses of ₹2,247 crore (FY 2024-25), indicating governance issues.  
4. **CAG Audit Highlights Financial Oversight**: CAG audits in ==Andhra Pradesh== flagged excess payments of about ₹968 crore and weak financial controls, underscoring accountability gaps.

**Impact on Indian Economy**

1. **Infrastructure and Regional Development**: PSUs have catalyzed infrastructure growth, exemplified by projects like Polavaram in ==Andhra Pradesh==, reducing regional disparities.  
3. **Fiscal Burden and Market Stabilization**: While some PSUs require budgetary support, they stabilize markets and ensure social equity by countering private monopolies.

**Way Forward**

1. **Enhance Autonomy and Accountability**: Strengthen PSU operational freedom and financial oversight, learning from CAG audits in ==Andhra Pradesh==.  
2. **Professional Management and Disinvestment**: Invest in capacity building and pursue strategic disinvestment and PPPs to improve efficiency, especially in ==Andhra Pradesh==.

**Conclusion**

PSUs have significantly contributed to India’s strategic and fiscal landscape, but addressing governance and efficiency challenges is essential for sustained impact.

Critically Examine the performance of public sector in Indian economy.

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Industrial Development and Policy (India)12 questions

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