Capital formation is a necessary condition for economic growth. This creates a nucleus for further growth.
(2) Development of Infrastructure:
Infrastructural facilities are as much essential for the economy to take-off, as the run-way for an aeroplane to take off. Infrastructure refers to power, transport, communication, irrigation, steel, cement and fertilizers. The public sector has played a pivotal role in creating infrastructural facilities in the development process of our economy.
(3) Role in Export Earnings:
Besides, public sector undertakings have been making a sizable contribution to the country’s export earnings by exporting goods as well as services, thereby earning substantial foreign exchange.
(4) Contribution to Import-Substitution:
The development process in our economy was launched through the ‘inward-looking strategy’ of import-substitution. The public sector has made an immense contribution to the process of substitution of indigenously produced goods. Bharat Heavy Electricals, Bharat Electronics, Hindustan Antibiotics, Indian Oil Corporation and Oil and Natural Gas Corporation are some of the leading public enterprises which are contributing towards self-reliance in their respective fields.
(5) Share in National Income:
In Indian mixed economic system; the growth process has been accelerated by the investment in the public sector. The contribution of the public sector in the generation of net domestic product has consistently been increasing.
(6) Share in Employment Generation:
Full employment is the most cherished goal of the economic policy of the government. The government of India and state governments are making contribution to employment generation through public investment in anti-unemployment programmes. Direct employment generation by the public sector takes place through the expansion of its administrative departments and economic enterprises.
(7) Balanced Regional Development:
The private sector is guided by the criterion of commercial return in its investment decisions. As a result, the private sector seeks to establish projects in only those regions which offer greater comparative cost advantage due to favourable position of factor endowment such as availability of power, raw material, labour and market. It is due to these factors that the large- scale private enterprises have been concentrated in the industrially developed states of Maharashtra, Gujarat, West Bengal and Tamil Nadu, Whereas PSUs have been opened in many backward areas, which have changed the local economy.
(8) Contribution to Exchequer:
The public sectors role can also be assessed in terms of its contribution to state exchequer. Its contribution to exchequer is both in terms of profit and taxes are huge.
Even sick public sector units contribute a great deal in terms of taxes and value added generation.