Business is an economic activity carried on by human to earn profit in a continuous

manner under the purview of rules and regulations of the country”.

Business consists of economic activities involving production, purchase and sale of
goods and services in order to satisfy the needs of society and to earn profit in the
process, Technically the term ‘business’ is derived from the word ‘busy’. This means
that someone is busy in earning profit through the process of purchase and sale.

Business – Characteristics
From the above discussion, we can draw certain characteristics of today’s
business which are as follows:
(i) It is a Human Activity:
Business is a human activity which makes available goods and services to the society.
It is not only dependent on making available the goods and services or the mere
production of these but also depends on the exchange of value which is provided in
return because if you are engaged in giving gifts to somebody then it will not be
treated as business.
(ii) Continuous Economic Activity:
In business an economic activity must be repeated again and again because if an
entrepreneur does not do that it will not be treated as business. For example, if a
person sells his own house, this activity does not come under the framework of
business.
(iii) Profit Motive:
Any economic activity which leads to generation of profit is considered as business.
Therefore, intension should be to earn profit otherwise if a person is engaged in social
service or preaching about the religion cannot be treated as business.
(iv) Entrepreneurship:
One cannot run any sort of business without the element of entrepreneurship
irrespective of the size of the business. Business can only be run by a daring person
who has the ability to face risk of loss. Because no business is there where the element
of risk is missing. Involvement of element of risk of loss makes the business world
more challenging and to face financial challenge is not everybody’s cup of tea.
(v) Creation of Utility:
A man does not produce anything in a way, he only converts the form of resources
which are provided by the nature. The business changes the form, place and
possession utility of goods and makes them available in usable form. The business
creates the utility of the things so that these can be consumed.

BUSINESS – Objectives
Though profit motive constitutes the primary objective of business activities, it
should not lead us to conclude that profit is the sole objective of a business.
Objectives of a business are multi-dimensional in nature.

They can be classified into four categories, namely:

(1) Economic objectives;
(2) Social objectives,
(3) Human objectives, and
(4) National objectives
These objectives are interrelated in nature.
(1) Economic Objectives:
The economic objectives of a business are discussed below:
(i) Earning of Profits – Profits are needed to provide adequate reward to the
entrepreneur and to provide funds for future growth. Entrepreneurship is one of the
important factors of production. Just as other factors get their rewards, the
entrepreneur must get reward for his efforts and taking of risk. Moreover, every
businessman will like to see that the business he is managing should grow. This is
possible only if the business earns sufficient profits for investing them into the
business for expansion.
(it) Satisfaction of Customers – The survival of the business depends upon the
satisfaction of customers. Thus, the business must aim at winning and satisfying the
customers. Peter F. Drucker has rightly said, “There is only one valid definition of
business purpose, i.e., to create a customer.” Customers are created through
advertisement and sales promotion and delivering them ‘want satisfaction’.
ADVERTISEMENTS:

(iii) Innovation – Innovation means developing new technology, new products and
their multiple uses. Business cannot succeed without designing new products and
finding their new uses.
(iv) Effective Utilisation of Resources – Business requires the use of men, machines
and materials which are considered scarce resources. Every business is expected to
make the best possible use of these resources. This objective can be achieved by
employing efficient personnel, making full utilisation of machines and reducing
wastage of raw materials.
(2) Social Objectives:
Social objectives of a business denote its obligations towards various stakeholders
including customers, employees, community and the government.
The important social objectives include the following:
(i) Supply of Quality Goods at Fair Prices – The business must supply quality
products as desired by the customers. The products should be durable, genuine (not
duplicate) and safe. The prices charged for the goods should also be reasonable.
(ii) Adoption of Fair Trade Practices – The business should follow fair business
practices at all times. It should avoid anti-social practices like hoarding, black-
marketing, over-charging the buyers, etc. It should also not indulge in unfair trade
practices like spurious products or misleading advertisements.
(iii) Generation of Employment Opportunities – Every business should grow and
expand its operations to create new jobs for the society. Further, a business should
employ suitable people without any discrimination based on caste, creed, sex or
religion.
(iv) Employees’ Welfare – It is an important responsibility of the business to promote
the welfare of its employees. Besides providing fair wages, the business should also
provide good working conditions, canteen facility, housing, transport and medical
facilities, etc., to the employees.
(v) Community Service – Modern business (iv) Employees’ Welfare engage in
community service to fulfil their social responsibility and thereby enhance their public
image. Community service may be carried out by running dispensaries and schools,
encouraging social activities and setting up training centres for the unemployed youths
in the backward areas.
(vi) Protection of Environment – Every business house should ensure safety of the
local surroundings and the protection of neighbourhood environment. It should take
adequate measures to check air, water or noise pollution.
(3) Human Objectives:
A business is directly linked with two important groups, namely, – (a) customers, and
(b) employees. Both these groups must have a feeling of having been treated as human
beings by the business enterprise. As human beings, customers expect courteous
service and fair dealings from the business.
The employees look forward to the business enterprise for the following
objectives:
(i) The employees are treated as partners in the business and not as inferior lot; they
should get fair wages and healthy working conditions;
(ii) They are able to acquire and develop new skills in the process of employment; and
(iii) They derive job satisfaction.
(4) National Objectives:
These objectives are concerned with the goals of the nation.
Every business enterprise must contribute to the national goals such as:
(i) Achievement of self-sufficiency in production of goods and services,
(ii) Import substitution and export promotion,
(iii) Development of small scale and ancillary industries,
(iv) Development of backward regions,
(v) Economic development of the nation.

Internal and External Environment of Business:

Business environment of the firms/company or organisation can be classified into two broad
categories:
i. Internal Environment
ii. External Environment

Internal Environment
The important internal factors which have a bearing on the strategy and other decisions are outlined
below.
Value System
The value system of the founders and those at the helm of affairs has important bearing on the choice
of business, the mission and objectives of the organization, business policies and practices. It is a
widely acknowledged fact that the extent to which the value system is shared by all in the
organization is an important factor contributing to success. The value system of JRD Tata and the
acceptance of it by others who matter were responsible for the voluntary incorporation in the Articles
of Association of TISCO its
social and moral responsibilities to consumers, employees, shareholders, society and the people. After
the EID Parry group was taken over by the Murugappa group, one of the most profitable businesses
(liquor) of the ailing Parry group was sold off as the liquor business did not fit into the value system
of the Murugappa group. The value system and ethical standards are also among the factors evaluated
by many companies in the selection of suppliers, distributors, collaborators etc.
Vision, Mission and Objectives
The business domain of the company, priorities, direction of development, business philosophy,
business policy etc., is guided by the vision mission and objectives of the company. Ranbaxy's thrust
in to the foreign markets and development has been driven by its mission "to become a research based
international pharmaceutical company. Arvind Mills' mission - "To achieve global dominance in
select business built around our core competencies through continuous product and technical
innovation, customer orientation and focus on cost effectiveness", - has driven its future development
strategy including the portfolio strategy, and indicated the thrusts required in the functional areas to
help achieve the mission.
Management Structure and Nature
The organizational structure, the composition of the Board of Directors, extent of professionalization
of management etc., are important factors influencing business decisions. Some management
structures and styles delay decision making while some others facilitate quick decision making. The
Board of Directors being the highest decision making body which sets the direction for the
development of the organization and which oversees the performance of the organization, the quality
of the Board is a very critical factor for the development and performance of company. The private
sector in India presents extreme cases in this respect. At one end there are companies with highly
qualified and responsible Board and at the other end there are companies which do not possess these
qualities. The share-holding pattern could have important managerial implications. There are very
large companies where majority of the share is held by the promoters (like Wipro) and there are large
firms where the promoters' position is very vulnerable (like the Tata group of companies). Financial
institutions had large share holding in many Indian companies. The stand of nominees of financial
institutions could be very decisive in several critical instances.
Internal Power Relationship
Factors like the amount of support the top management enjoys from different levels of employees,
shareholders and Board of Directors have important influence on the decisions and their
implementation.
The relationship between the members of Board of Directors and between the chief executive and the
Board are also critical factors.
Human Resources
The characteristics of the human resources like skill, quality, morale, commitment, attitude etc., could
contribute to the strength -and weakness, of an organization. Some organizations find it difficult to
carry out restructuring or modernization because of resistance by employees whereas they are
smoothly done in some others. The involvement, initiative etc., of people at different levels may vary
from organization
to organization. The organizational culture and overall environment have bearing on them. John
Towers, M.D., Rover Group, observes that a Japanese company of 30,000 employees is 30,000
process improvers. In a Western company, it is 2,000 process improvers and 28,000 workers. And in
an Indian company?
Company Image and Brand Equity
The image of the company matters while raising finance, forming joint ventures or other alliances,
soliciting marketing intermediaries, entering purchase or sale contracts, launching new, products etc.
Brand equity is also relevant in several of these cases.

Miscellaneous Factors
There are a number of other internal factors which contribute to the business success/failures or
influence the decision-making. They include the following.
1. Physical Assets and Facilities like the production capacity, technology and efficiency of the
productive apparatus, distribution logistics etc., are among the factors which influence the
competitiveness of a firm. For example, as quality is very important in the pharmaceutical industry,
particularly for a global player, in the case of Core Healthcare not only there is no compromise on
quality but also the company made the quality norms stricter than international or other relevant
standards and the quality mantra has been well imbibed throughout the organization.
2. R & D and Technological Capabilities, among other things, determine a company's ability to
innovate and compete.
3. Marketing Resources like the organization for marketing, quality of the marketing men, brand
equity and distribution network have direct bearing on marketing efficiency. They are important also
for brand extension, new product introduction etc.
4. Financial Factors like financial policies, financial position and capital structure are also important
internal environment affecting business performances, strategies and decisions.
External Environment
As stated earlier, the external business environment consists of a micro environment and
a macro environment.
Micro Environment
"The micro environment consists of the actors in the company's immediate environment that affects
the performance of the company. These include the suppliers, marketing intermediaries, competitors,
customers and the publics." The macro environment consists larger societal forces that affect all the
actors in the company's micro environment namely, the demographic, economic, natural, technical,
political and cultural forces." It is quite obvious that the micro environmental factors are more
intimately linked with the company than the macro factors. The micro forces need not necessarily
affect all the firms in a particular industry in the same way. Some of the micro factors may be
particular to a firm. For example, a firm which depends on a supplier may have a supplier
environment which is entirely different from that of a firm whose supply source is different. When
competing firms in an industry have the same' micro elements, the relative success of the firms
depends, inter alia, on their relative effectiveness in dealing with these elements.
Suppliers
An important force, in the micro environment of a company is the suppliers, i.e., those who supply the
inputs like raw materials and components to the company. The importance of reliable source/sources
of supply to the smooth functioning of the business is obvious. Uncertainty regarding the supply or
other supply constraints often compels companies to maintain high inventories causing cost increases.
It had been pointed out that factories in India maintained indigenous stocks of 3-4 months and
imported stocks of 9 months as against an average of a few hours to two weeks in Japan.4 The
liberalization,
however, has caused a significant change in the situation. Because of the sensitivity of the supply,
many companies give high importance to Vendor development. Vertical integration where feasible,
helps to solve the supply problem. For example, Nirma has always been a believer of the logic'" that
captive production plants for raw materials is the best way to production costs in check and it has
gone for a
mammoth backward integration. In many cases, however, outsourcing is more beneficial. It is very
risky to depend on a single supplier because a strike, lock out or any other production problem with
that supplier may seriously affect the company. Similarly, a change in the attitude or behavior of the
supplier may also affect the company. Hence, multiple sources of supply often help reduce such
risks.The supply management assumes more importance in a scarcity environment. "Company
purchasing agents are learning how to "wine and dine" suppliers to obtain favorable treatment during
periods of shortages. In other words, the purchasing department might have to "market “itself to
suppliers." Recognizing the critical importance of the supply factor, companies all around the world
are increasingly resorting to partnering / relationship marketing.
Customers
As it is often exhorted, the major task of a business is to create and sustain customers. A business
exists only because, of its customers. Monitoring the customer sensitivity is, therefore, a prerequisite
for the business success. A company may have different categories of consumers like individuals,
households, industries and other commercial establishments, and government and other institutions.
For example, the customers of a tire company may include individual automobile' owners,
automobile manufacturers, public sector transport undertakings and other transport operators.
Depending on a single customer is often too risky because it may place the company in a poor
bargaining position, apart from the risks of losing business consequent to the winding up of business
by the customer or due to the customer's - switching over to the competitors of the company. With the
growing globalization, the customer environment is increasingly becoming global. Not only that the
markets of other countries are becoming more open, the Indian market is becoming more exposed to
the global competition and the Indian customer is becoming more "global" in his shopping.
Competitors
A firm's competitors include not only the other firms which market the same or similar products but
also all those who compete for thee discretionary income of the consumers. For example, the
competition for a company's televisions may come not only from other T.V manufacturers but also
from two-wheelers, refrigerators, cooking ranges, stereo sets and so on and from Firms offering
savings and investment schemes like banks, Unit Trust of India, companies accepting public deposits
or issuing shares or debentures etc. This competition among these products may be described as
desire competition as the
primary task here is to influence the basic desire of the consumer. Such desire competition is
generally very high in countries characterized by limited disposable incomes and many unsatisfied
desires (and, of course, with many alternatives for spending/investing the disposable income). If the
consumer decides to spend his discretionary income on recreation (or recreation cum education) he
will still be confronted with a number of alternatives to choose from like T.V., stereo, two-in-one,
three-in-one etc. The competition among such alternatives which satisfy a particular category of
desire is called generic competition. If the consumer decides to go in for a T.V., the next question is
which form of the T.V black and white .or Colour with remote control or without it etc. In other
words, there is a product form competition. Finally, the consumer encounters the brand
competition i.e. the competition between the different brands of the same product form. An
implication of these different demands is that a marketer should strive to create primary and selective
demand for his products. Consequent to the liberalization, the competitive environment in India has
been undergoing a sea change. Many companies restructured their business portfolio and strategies. In
many industries where a seller's market existed a buyer's market has emerged.
Marketing Intermediaries
The immediate environment of a company may consist of a number of marketing intermediaries
which are "firms that aid the company in promoting, selling and distributing its goods to final buyers”.
The marketing intermediaries include middlemen such as agents and merchants who "help the
company find customers or close sales with them", physical distribution firms which "assist the
company in stocking and moving goods from their origin to their destination such as warehouses and
transportation firms; marketing service agencies which "assist the company in targeting and
promoting its products to the right markets such as advertising agencies, marketing research firms,
media firms and consulting firms; and financial intermediaries which finance marketing activities and
insure business risks. Marketing intermediaries are vital links between the company and the final
consumers. A dislocation or disturbance of the link, or a wrong choice of the link, may cost the
company very heavily. Retail chemists and druggists in India once decided to boycott the/products .of
a leading company on some issue such as poor retail margin. This move far collective boycott was,
however, objected to by the MRTP Commission; but for this the company would, perhaps, have been
in trouble. Hindustan Lever too faced major challenge when it faced a collective boycott in Kerala on
the issue of trade margin.
Financiers
Another important micro environmental factor is the financiers of the company. Besides the financing
capabilities, their policies and strategies, attitudes (including attitude towards risk), ability to provide
non-financial assistance etc. are very important.
Publics
A company may encounter certain publics in its environment. A public is any group that has an actual
or potential interest in or impact on an organization’s ability to achieve its interests. Media publics,
citizen’s action publics and local publics are some examples.
Macro Environment
A company and the forces in its micro environment operate in a larger macro environment of
forces that shape opportunities and pose threats to the company. The macro forces are, generally,
more uncontrollable than the micro forces. When the macro environment is uncontrollable, the
success of a company depends on its adaptability to the environment. For example, if the cost of the
imported components increases substantially because of the depreciation of the domestic currency, a
solution may be their domestic manufacture. Important macro environment factors include economic
environment, political and regulatory environment, social/cultural environment, demographic
environment, technological environment, natural environment, and global environment.
a) Technological Environment
Technology is understood as the systematic application of scientific or other organized knowledge to
practical tasks. Technology changes fast and to keep pace with it, businessmen should be ever alert to
adopt changed technology in their businesses.
b) Economic Environment
There is close relationship between business and its economic environment. Business obtains all its
needed inputs from the economic environment and it absorbs the output of business units.
c) Political Environment
It refers to the influence exerted by the three political institutions viz., legislature executive and the
judiciary in shaping, directing, developing and controlling business activities. A stable and dynamic
political environment is indispensable for business growth.
d) Natural Environment
Business, an economic pursuit of man, continues to be dictated by nature. To what extend business
depends on nature and what is the relationship between the two constitutes an interesting study.
e) Global or international Environment
Thanks to liberalization, Indian companies are forces to view business issues from a global
perspective. Business responses and managerial practices must be fine-tuned to survive in the global
environment.
f) Social and culture Environment
It refers to people’s attitude to work and wealth; role of family, marriage, religion and education;
ethical issues and social responsiveness of business.

Public, Private, Joint and Co–operative Sectors:

THE PUBLIC SECTOR
Any organisation that is under government ownership and control are called public sector
units. Here, public means the government and not the general public. On the Basis of the way they are
created, and the flexibility and autonomy provided to them, Public sector units are divided into
'Departmental Undertakings' (or Departments), 'Corporations’ and 'Companies'. For example,
anything, which is directly under the ownership, control, and management of government, such as
railways, post & Telegraph, atomic power, etc. are called 'departments'.
Likewise, any public Undertakings, which have been formed by that: special act of the
parliament or state Legislatures are called 'corporations'. Some of the examples of public corporations
Are Life Insurance Corporation of India, Industrial Financial Corporation of India, Damodar Valley
Corporation, Oil & Natural Gas Commission, etc.
Lastly, the public Undertakings, which are formed under the Companies' Act, 1956, like any
other Companies are called government companies. According to this Act. A government Company is
that in which not less than 51 % of 'paid-up share capital is owned by the Central government, or by
any State Government or Governments, or jointly by the Central and State Governments. Examples of
'government companies are Bharat Heavy Electricals Limited, Madras Refineries Ltd., Gujarat State
Fertilizer Corporation Ltd., etc.
They are run like any other private companies. The term "Public enterprises" usually refer to
non-departmental undertakings, which include Corporations as well, companies. Depending, on which
government is the owner, Organizations in public sector can be categorized as central public
enterprises, state Public enterprises and local public enterprisers (enterprises owned and managed by
Local government). It is important to note that there is a difference between the 'public sector' and
'Public limited' companies. Public sector, as r mentioned earlier, must have ownership and control by
general government.
 For example all government owned companies Are called public sector units, whereas and
publicly held unit where owners' or Stock holders' liability is limited by the amount of share owned,
are called 'public Limited company'.
Role of Public Sector
In most of the countries, the activities, which are not privileged or undertaken by private
sector, are left to the public sector to perform. In other words, public (and merit) goods and services,
such as water supply, roads and bridges, health, and education are provided only by public sector
(government). Thus public sector produces those goods and services that it can deliver best and
private sector produces those that it can do best. However, for strategic reasons, certain goods and
services are kept exclusively for public sector production even though private sector is willing and can
produce and deliver those goods and services.
In India, from the very beginning since independence, a 'mixed economic system' was
envisaged. Under this system both public and private sectors were expected to make equally
significant contributions to the progress and property of the country. In the Indian concept of 'mixed
economy', in the public sector was accorded far significant role in comparison to the traditional .roles
played by it elsewhere.
The aim of massive investment in public sector was not only to control the 'commanding
heights' of the economy but also to make up for-the initial limitations of the private sector in an
undeveloped country. 'Commanding heights' consisted of: infrastructural industries, such as roads and
bridges, railways, civil aviation, water supply, electricity, telecommunications, etc. and ii) basic
industries such as iron and steel, oil and petroleum, heavy capital goods, chemicals, fertilizers, etc. It
was felt that establishment of basic industries should be left to public sector so that limited resources
could be put to their best use. These industries anyway would not have appealed to the private sector
as infrastructure and basic industries need long gestation periods, heavy investments, and yield low
returns. As per the felt need, some activities were left exclusively within the purview of public sector
and rest was left for both public and private sec and initiatives.
The major objectives of public sector are to help in rapid economic growth, rapid
industrialization, and create infrastructure for economic development. The other declared objectives
of public sector are: to promote redistribution of income and wealth, to promote balanced regional
development, to generate employment opportunities, and to promote import substitution and save
precious foreign exchanges. Ever since the Industrial Policy Resolution, 1956, the public sector has
been playing a strategic role in our economy. The dominant role of public sector was maintained
during different plan periods which has however been reduced substantially after economic
liberalization of 1991.
Growth and Achievements of Public Sector in India
At the time of independence, the range of activities within public sector was limited. The
private sector dominated the entire range of activities. However, after the independence, the activities
of the public sector were expanded and public sector enterprises started engaging in wide range of
manufacturing and service industries. Since then there has been significant growth of public sector in
terms of investment, size, and number of units within it. As on March 3 1 ", 1998, in central public
sector alone, there were 240 units and total investments in these units amounted to Rs. 2,04,054,
crores, which accounts for about 30% of the gross investment. This is a substantial jump over just 5
units as on lst April, 1951 , when investment was mere Rs. 29 crores. As on March 313, 2000, there
are 240 CPEs (8 under construction, 157 involved in manufacturing/producing goods, and 75
rendering services). Apart from CPEs, around Rs. 2,09,000 crores have been invested in state level
public enterprises numbering about 11 00 units. Around Rs. 1,00,000 crores has been invested in
departmental and local level public sector units. Public sector contributes to about 45% of capital
formation.
According to National Accounts Statistics, 1998, the share of public sector in GDP is around
25%. It contributes around 7% to gross domestic savings (GDS), and around 29% to gross domestic
capital formation (G DCF). During the initial planning period, public sector played a big role in
capital formation. But, after two decades of planning, the share of public sector in gross domestic
capital formation started declining. As in the case of any underdeveloped country, India also inherited
an undeveloped infrastructure from its colonial past. As private sector didn't have sufficient resources
and inclination to invest in infrastructure projects, which involved massive investment, public sector
contributed a lot in building up the basic infrastructure for economic growth.
Drawbacks and Limitations
Approximately, 40% of central public sector units are chronic loss makers. The enterprises
also did not make much headway in terms of human resource development in training, skilled labour,
worker motivation, managerial initiative, and incentive or productivity linked wages. In terms of
value added, public sector contributes even less than half o f private sector. Though public sector has
helped create a broad and diverse industrial base, its performance in several fonts has been dismal.
Public sector faces certain limitations owing to the nature of its objectives. Pricing policy of public
sector is not always profit oriented. In most of the cases, it runs on no-profit no loss principle. This
leads to lack of incentives for efficiency in the system and thus the competitive spirit gets lost.
Sometimes, vast capacity is created but it remains under-utilized owing to lack of demand or possibly
due to lack of base. Public sector frequently suffers from project and cost overruns. One of the major
problems, in public sector, is labour problem. Trade unions are conspicuous by their militant
activities. Till few years back, there was no policy, which could take care of shedding of excess
labour. Because of the very nature of the organisation, public sector lacks autonomy and flexibility.
THE PRIVATE SECTOR
Any organisation, which does not belong to public sector, can be taken to be part of private
sector. The firms, owned and managed exclusively by private parties (could be individual or
collective) are known as private sector units.
Private sector is sub-divided into:
a) Private corporate sector, which includes : i) joint stock companies, and ii) cooperatives, and
b) Household sector.
In India, over the years, the range of goods and services where private sector has taken
initiative and is playing a major role, has widened substantially. These days, almost everything
conceivable is being manufactured in private sector. In terms of number of owners involved, private
sector can be subdivided into two categories, namely, 'individually owned' and 'collectively owned'.
Individually owned firms are managed by single person and work with the objective of profit
maximisation. Collectively owned private firms can be sub-divided into :
i) partnership, ii) joint-stock companies, and iii) cooperatives.
In partnership the firm is jointly owned and managed/controlled by more than one person. As
partnership is based on the sharing of the profit the main objective of a partnership is maximisation of
profit. The private sector plays an important role in the industrialization and development
Ownership Structure process of a country. Developed countries have a long history of
private sector involvement. Particularly in the West, private sector has been the prime mover of
growth. Because of the profit motive, private sector tends to be more innovative in its approach
towards production and processes. Profit motive not only drives it to make efficient use of available
resources, but also compels it to constantly introduce newer products. Thus it contributes to welfare of
a nation through provisions of
varieties of goods and services at competitive prices. Because of its positive role. private sector is
being given renewed importance everywhere to contribute in the development process. After 3
decades of planning era with emphasis on greater public sector role, India started realising the
potential of private sector in mid eighties. The Move towards privatisation was ad hoc in nature in the
latter half of eighties.
However, 1991 onwards, private sector was accorded significant role in the industrial
development of the country. It is commonly observed that when public sector takes up the leading role
in the development of infrastructure and basic industries, private sector plays dominant role in
intermediate and consumers goods industries However, after 1991, even industries previously
renewed for the public sector are being opened up to private sector. Small and tiny industries, which
belong to private sector, also make substantial contribution in the development process of a country.
(Even industries previously reserved for the public sector are being opened upto private sector).
Small-scale industries create employment opportunities, make efficient use of the local resources,
provide scope for the exploitation of local entrepreneurial abilities, help in income generations, reduce
interpersonal income disparities and so on.
Growth and Contribution of Private Sector
 In spite of limited areas of operation, the private sector in India has grown in size, and
turnover. Private sector contributes around 15% of GDP to gross domestic capital formation, which is
more than double of that of public sector. Private sector contributes around 22% of GDP to gross
domestic savings of the country. In tens of employment, private sector's contribution is way behind
that of public sector.
The total employment in private sector is around 87 lakhs whereas in public sector it is more than 194
lakhs. However, the available statistics suggests that there has not been much growth in employment
generation in public sector in the last decade. Rather there has been negative growth in employment
since 1997. But, it has been steadily growing in private sector except a negative growth from 1998 to
1999.
Disadvantages and Limitations
The main motive of private sector is to maximise profit. Thus the areas1 industries where
returns to capital is high gestation period is comparatively short, and investment required is not bulky,
suit them the most. However, despite their contribution to employment generatihn and a diverse
industrial base, the growth in this sector has not been sufficient. Greater interest in consumers goods
industry (by private sector) to earn quick buck creates an unbalanced kind ofpattems ofproduction,
which may not be sustainable if &country does not have suitable infrastructure base. In India, private
sector has hardly contributed to infrastructure and basic industries, which are considered the backbone
of a national economy. However, recently, there is a surge in private sector investment in
telecommunications, roads and transport, energy, petrochemicals, etc.
Too much of private sector involvement, specifically if it is unregulated, not only creates but
also tends to strengthen monopoly power and concentrate wealth in few hands. If a level playing field
is not created the players who already have resources tend to gain maximum benefit out of greater
private sector participation thus ultimately creating inequitable distribution of income, Private sector
is not always dominated by entrepreneurs who have enough resources. Particularly in a country like
India, where capital is scarce, private sector initiative remains tardy owing to the non-availability of
venture capital. If capital market is not developed and it is difficult to raise sufficient resources from
financial institutions,
private sector cannot contribute to progress at a desired pace.
THE JOINT SECTOR
Joint sector is a type of organisation where both government and private entities act as
collaborating partners. Though joint sector gained prominence after the Dutt Committee report in
1969, this form of organisations had already started appearing after the Industrial Policy Resolution of
I 956. This resolution made provisions for collaborative ventures between private and public sector. In
this type of arrangement, both private sector and public sector own, control, and manage resources
jointly, hence the name 'joint sector'.
Earlier, public financial institutions hardly had any control over the resources they had
invested in private sector. The idea of joint sector was broached so that public sector could have some
control over the financial resources. In joint sector, not more than 50% of equity can be owned by the
government financial institutions together. Secondly, a single private investor cannot hold more than
25% of the paid-up capital without the permission of the Government of India. A joint sector firm can
be formed in accordance with the Companies' Act of 1956. Some of the famous names in joint sector
are Bharat Shell, Container Corporation of India (Concor), Maruti Udyog Ltd., Gujarat State Fertiliser
Corporation, Haldia Petrocl~emicalsL td., Mangalore Refineries and Petrochemicals Ltd. etc.
Role and Advantages of Joint Sector
The joint sector was envisaged so that some of the elements of social development could be
provide;. Like public sector, joint sector also help in achieving social objectives such as creation of
employment opportunities, reduction of inter-regional disparity, and development of backward
regions. Participation of the government in the business helps control concentration of monopoly
power; curb the growth of monopolies and business malpractices. The advantages of joint sector are
that it can combine best of both the public sector and the private sector. In a joint sector firm, much-
needed financial resources can be obtained the public financial institutions and the private party can
put in their best practices so that it can lead to better industrial growth in the desired direction. Thus
joint sector can broad base the industrial structure by motivating firms to areas or industries where
private sector would not have ventured alone.
Limitations and Disadvantages
Joint sector firms have the potential for conflict between the parties involved in the venture.
As private sector is profit oriented and public sector hr: social goals to achieve, this can create conflict
in objectives.
THE COOPERATIVE SECTOR
The organisations where people join voluntarily to pursue economic interests are known as
cooperative societies, which are collectively known as cooperative sector. A cooperative society is a
voluntary, independent business enterprise, formed to satisfy common need(s) of the participating
members of the venture. They can be production-, market- and service-oriented. In tems of
organisations, cooperatives differ from other types of firms. In case of private sector and even in the
case of public sector, the persons who own the resources, persons who control the resources, and the
persons who are the final customers or users, are normally separate entities. Thus, the components of
ownership, control, and use are not unified. However, in a cooperative type organisation, all the above
three entities belong to the same group. In other words, in a cooperative type arrangement, those who
own resources, those
who control the resources, and those who use the final goods and services are all one and the same
group. These characteristics of the cooperative sector make it essentially different fiom private and
public sector. By virtue of the very nature of the organisation, cooperatives call for direct
responsibility and accountability from the cooperating agents.
Cooperative type organisations, of course of different variants, are very popular in European
countries, (especially the Scandinavian countries), Japan, Israel, Canada, and India. Cooperative firms
were quite popular in erstwhile USSR. Consumers' cooperatives, agricultural cooperatives, and other
types, such as housing, banking and workers' productive cooperatives are quite popular in West-
European countries. Literature suggests that some of the largest concentration of cooperative
development is still there in Western Europe. In USA, most of the cooperative organisations remain
confided to rural areas and deal with agriculture related activities. In Japan, cooperatives are mostly
rural by nature, well organised, well integrated and most of the farmers belong to multi-purpose
cooperatives. Whichever country they belong to, in majority of the cases cooperatives have catered to
the needs of rural and agrarian classes. International Cooperative Alliance (ICA) reveals some
impressive bets and figures about the dominance of cooperatives sectors. To quote a few more, 60%
of chicken, 87% of pyrethrum, and 40% of Public, Private, cotton are marketed by cooperatives in
Bolivia. Kenya, instances and Brazil
respectively.
AMUL dairy cooperatives market a major share of India's milk production. Cooperative
ventures in India span sectors such as agriculture, industry, and services. Within these sectors,
Cooperatives are found in many sub-sectors. Functionally, these cooperatives work for various
purposes such as marketing, !supply of raw materials, credits, etc. Some of the credit societies in the
cooperative sector are agricultural credit societies, industrial cooperative banks, non-agricultural
credit societies, and State cooperative agricultural and rural developmental banks. There are
marketing societies for cotton, fruits and vegetables, tobacco, coconut, and there are like cotton
ginning and pressing societies, and agricultural processing’s societies.
Myriad other different types of cooperatives include cold storage cooperatives, imitation
societies, energy cooperatives, farming societies, health care cooperatives, telecommunications
cooperatives, weavers' societies, other industrial societies, cooperative industrial estates, labour
contracts and constructor’s societies, forest labourers societies, tribal cooperatives, transport societies,
electronic cooperatives, women's co-operative societies, students cooperative societies, multi-unit
cooperative societies and others. Famous names in the cooperative sector are Indian Farmers
fertilizer Cooperative Ltd. (IFFCO) in Gujarat and the finest symbol of cooperative movement in
India now is AMUL, a formidable brand, not only in milk products but also in ghee, butter, cheese,
chocolates, ice creams, and now in pizza too.
Objectives of Cooperative Sector
The objective of cooperative societies is to provide maximum possible service at the least
expense possible. Thus cooperative societies don't pursue the economic objective of maximisation of
profits. Because the cooperatives have economic interests and their effectiveness is measured y the
same standard as that for private sector. Cooperatives were conceived to create a system of self-help
among the poorer lot of the society. The objectives of cooperative movement in India are not only to
provide goods and services at a cheaper rate to the cooperating community, but also to instil a sense of
togetherness and collaborative management of resources by the cooperating community. which cannot
be satisfactorily served by public sector or private sector.

Growth and Limitations

India figures quite prominently in any literature when cooperative involvement is concerned.
India's Amul, campaigning as the "taste of India", is not only a formidable brand today, but also, has
shown the world what cooperative venture is capable of doing. According to National Cooperative
Union of India. There has been a notable growth of cooperatives ill India. Latest data suggests that not
covers around 67% of total rural households. There are 2 1 national level cooperative federations and
more than 3513 state level cooperative federations. A look at the growth of . cooperative movement
reveals that in 1998-99, there were 209 million members in various cooperatives, which was just 51
million in mid-sixties.