7.2. The Policy of Privatisation

The public sector enterprises were established in many countries primarily for pragmatic reasons but partly for ideological reasons. In recent years, however, with the emergence of a new philosophy of economic liberalisation, the private sector and the market forces have acquired prominence.

In the past, the policy-makers in India traditionally held the view that the public sector was the prime mover for economic development. The Industrial Policy Resolution of 1956 assigned a strategic role to the public sector in India. Accordingly, massive investment was undertaken during the Five-Year Plans to build the public sector. There is no doubt that the public sector in India was able to establish the industrial base in the country by developing heavy and basic industries and by providing the requisite infrastructure.

However, for quite some time now, there has been a change in the perception about the role of the public sector in the process of economic development and their role is being reappraised. An important development that has been witnessed, at the same time, is the process of privatisation.