The following points highlight the seven crucial objectives of public sectors in a mixed economy.

Objective # 1. Transformation of the Economy:

Imme­diately after attaining Independence the Govern­ment declared that India was going to have a so­cialist pattern of society.

The public sector was supposed to transform the economy in such a fash­ion that it could move towards socialism. It was felt that if development is to proceed at the de­sired rate and to contribute effectively to the at­tainment of the larger socio-economic goals, the public sector must grow not only absolutely but also relatively to the private sector.

Objective # 2. Redistribution of Income and Wealth:

It is needless to argue that the basic goal of a social­ist pattern of society could not be achieved with­out improving the existing pattern of income and wealth distribution. This is possible by raising in­comes at low levels, while simultaneously reduc­ing it at the top.


As J. S. Uppal has rightly com­mented:

“Public sector and other public policies will seek to reduce inequalities of income and achieve a more equitable distribution through land reforms, ceiling on urban property, an appropriate tax structure and fiscal policy, channelisation of profits to the Government, which will be spent for welfare of the weaker sections, regulation of in­comes of top executives in public enterprises and discriminatory price policies for mass consump­tion goods.”

Objective # 3. Source of Capital Formation:

There is no denying the fact that one of the major determi­nants of the rate of economic growth and the pat­tern of income and wealth distribution is the man­ner of utilisation of profits from business enter­prises. In private enterprises, profits are distrib­uted largely among shareholders who are already well-off. This results in inequality in distribution of income and wealth.

In public sector enterprises, a major portion of undistributed profit is ploughed back for expansion or diversification (i.e., setting up of new enterprises to produce new products) or, for building a strong and viable socio-economic infrastructure for the benefit of all. Therefore one of the important goals of public sector enterprises in India has been promotion of capital formation. This has, no doubt, been achieved to some extent.

Objective # 4. Development of Socio-Economic Infra­structure:


The inadequacy, if not complete ab­sence, of socio-economic infrastructure—espe­cially in basic and heavy industries and transport and communication facilities—is the proximate cause of economic backwardness of LDCs. In fact, one of the major obstacles to India’s economic development has been the relative absence of ba­sic and heavy industries.

Since the development of infrastructural industries requires huge initial investment, involves long gestation period and yields very low initial return, private investors turn away from such investment projects. So it is in the rightness of things for the public sector to develop those industries in which private sector is unable and unwilling to put the resources required and undertake the risks involved.

Objective # 5. Achievement of Balanced Regional De­velopment:

One of the declared objectives of the Government of India’s industrial policy has been to achieve balanced regional development. So the Government has consistently stressed the need to reduce regional inequalities by encouraging the location of public undertakings in economically backward regions.

The steps taken to achieve this objective, through public enterprises, include:


(a) grant of credit at a concessional rate through public enter­prises,

(b) provision of an integrated infrastructure such as electricity, transport and water,

(c) special consideration for setting up public sec­tor industrial undertakings in backward areas and preference to backward areas in licensing of in­dustries.

Objective # 6. Reduction of Concentration of Wealth and Economic Power in Private Hands:

Increased national output is not enough. The fruits of progress must be shared by all sections of society. To en­sure this it is necessary to remove, or reduce, con­centration of wealth and economic power in pri­vate hands. In fact, discouraging concentration of economic power and preventing the growth of monopolies and big business have been the de­clared objectives of the Government throughout the plan period.

The 1956 Resolution emphasised “the urgency of reducing disparities in income and wealth and preventing private monopolies and the concentration of economic power in different fields in the hands of a small number of persons.” Be­sides emphasising the need to strengthen the pub­lic sector for achieving this goal, the resolution also called for greater equity (and less loan) capi­tal while granting assistance from public financial institutions and a steady increase in the propor­tion of activities of private sector to be developed along co-operative lines.

Objective # 7. Attainment of the Planned Resource Allocation:

Finally, the public sector enterprises are supposed to enable the planners and policy­makers to achieve better resource allocation, con­sistent with the development strategies of the coun­try. Public sector enterprises will seek to achieve this objective by promoting the development of small-scale and cottage industries so as to create employment opportunities, alleviate poverty by producing mass consumption goods and improve the balance of trade position through import substitution and export promotion.