The industrial policy regulations of 1948 and 1956 earmarked industries of basic and strategic importance or of the native of public utilities whose development would exclusively be the responsibility of the public sector.
As a result, iron & steel, heavy machinery, heavy chemicals, mineral oils, generator, transportation distribution of electricity, railway transport, heavy engineering, heavy electrical, machine tools industries have been promoted in the public sector.
In short the establishment of large number of capital goods and important, strategic, capital intensive industries have led to the growth of public sector in India. Many of these industries had long gestation period of investment, in which private sector would not invest.
(3) Creation of Financial Infrastructure:
Finance is the key to modern industries. To create a situation for industrial growth a strong financial infrastructure is necessary. The growth of the public sector has also been due to establishment of a large number of development banks of India, Unit Trust of India, the Export Import Bank and National Bank of Agriculture and Rural Development are in the public sector engaged in providing development finance, term loans and key financial services.
As much as 20 big banks were nationalised in two occasions once in 1969 and again in 1980. Thus, during the last three decades, a very important and crucial segment of financial mechanism has passed into the direct control of government through nationalisation of the existing private financial institutions and the creation of new institutions with government’s patronisation and enterprise.