Indian public sector has time and again proved itself as a crucial and indispensable part of the Indian economy. Two decades of economic liberalisation, which sought to promote private sector investment, has also helped to strengthen the public sector. Despite strong competition from the private sector, the public sector has held on to its position as a catalyst for planned development and growth. This becomes clear when we see performance and investment by CPSEs. Besides, the public sector is today a willing ally in the acclaimed public-private partnership (PPP) model for developing critical infrastructure.
Planned investment in public enterprises has been growing over the years and it has gone up from R1.63 lakh crore in 2007-08 to R2.93 lakh crore in 2011-12 and is likely to go up further to R3.24 lakh crore in 2012-13. As is evident from Table 1, it has always remained robust. In fact, planned investment in public enterprises at R2.07 lakh crore and R2.93 lakh crore was substantial in 2008-09 and 2011-12, respectively, when the recessionary pressures were severe and private sector investment was not forthcoming.
A growth of over 31% in planned investment in PSEs in 2011-12 was particularly significant when the overall growth rate of investment in the economy had suffered in 2011-12. Further, in 2009-10 and 2010-11, there have been high inflation and a sharp increase in interest rates, which pushed up the cost of borrowing. This, along with other rising costs, affected profitability and thus internal accruals to finance investments. Yet the public sector investment has kept up the momentum.
Another significant aspect about the public sector that emerges from the budget is the fact that planned investment in CPSEs as a percentage of total central plan outlay accounts for about 50%, with slight variation from year to year (Table 2). This is indicative of the public sector?s role and significance in the country’s planned development. It is a matter of great pride that the public sector continues to drive India’s economic growth even after more than two decades of structural reforms and liberalisation that sought to promote and encourage larger private sector investment as a policy.
This assertion becomes even more visible and authentic when data pertaining to CPSEs is taken into account. The plan investment in CPSEs registered over 13% increase in 2007-08 over the previous year 2006-07, reaching R1.09 lakh crore. Subsequently in 2008-09 and 2009-10, the growth in planned investment in CPSEs increased sharply to 20.69%, still maintaining the positive momentum (Table 3).
It is also evident that CPSEs are increasingly funding their investments from internal resources, thereby reducing their dependence on the government funding and budgetary support. During the same period i.e. from 2007-08, internal resources of CPSEs have gone up from over 60 % in 2006-07 to 64% in 2010-11 while budgetary support has come down from 5.43% to 2.46%. This is also indicative of growing efficiency and profitability of the PSEs.
The CPSEs? efforts to improve their competitiveness have started paying off and the public sector has emerged as a sheet anchor to the Indian economy. Lower dependence on government support would mean more resources for social welfare activities at the disposal of the government, thereby strengthening the agenda of inclusive economic growth for the country.
The Approach Paper to the 12th Plan has envisaged about 50% private sector investment in the infrastructure sector for 9% gdp growth. It has also emphasised on greater public-private partnerships as a means for attracting more investment. This highlights public sector?s relevance and capability to shoulder larger responsibilities in pushing the government?s growth agenda.
The author is director-general, Scope
