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1. Introduction
This chapter discusses how businesses are owned and operated by different entities – private individuals, the government, or in collaboration with foreign investors. It explains the rationale behind each form and the role they play in the economy.
2. Private Sector Enterprises
These are owned, controlled, and managed by individuals or groups of individuals who aim to earn profits. They include:
a. Sole Proprietorship
- One person owns and runs the business.
- Features: Quick decisions, limited capital, unlimited liability.
b. Partnership
- Two or more persons (up to 20) jointly own a business.
- Governed by the Indian Partnership Act, 1932.
- Features: Shared responsibility, combined skills, unlimited liability.
c. Joint Hindu Family Business
- Exists under Hindu Law.
- Managed by the eldest male member (Karta).
- Membership is by birth.
d. Cooperative Societies
- Voluntary association for mutual benefit.
- One vote per member, irrespective of capital contribution.
e. Company (Private/Public Ltd.)
- Separate legal entity.
- Owned by shareholders, managed by a board of directors.
- Limited liability of owners.
3. Public Sector Enterprises
Owned and managed by the government (Central, State, or both). Aimed at providing services and promoting public welfare, not just profits.
a. Objectives of Public Sector
- Balanced regional development.
- Employment generation.
- Infrastructure development.
- Avoiding concentration of economic power.
b. Forms of Public Sector Enterprises
i. Departmental Undertakings
- Run directly by government departments (e.g., Railways, Post).
- Features: Funded through the government budget, accountable to the ministry.
- Limitations: Bureaucratic, inflexible.
ii. Statutory Corporations
- Set up by a special act of Parliament (e.g., LIC, RBI).
- Autonomous, with legal identity.
- More operational flexibility than departmental undertakings.
iii. Government Companies
- Companies in which the government holds at least 51% shares.
- Registered under the Companies Act (e.g., BHEL, ONGC).
- Operate like private companies but are answerable to the government.
4. Changing Role of the Public Sector
- Initially, the public sector played a major role in industrialization.
- However, due to inefficiencies and fiscal burden, liberalization in the 1990s reduced public sector involvement in many areas.
- Shift toward disinvestment and privatization.
5. Joint Ventures
- Business agreements where two or more parties pool their resources for a specific goal or project.
- Can be between private or public & private firms.
- Benefit: Shared risk, access to new markets and technology.
6. Global Enterprises (Multinational Companies – MNCs)
These are large businesses that operate in multiple countries.
Features:
- Huge capital investment.
- Advanced technology.
- Centralized control but decentralized operations.
- Example: Coca-Cola, Samsung, Nestlé.
Advantages:
- Employment generation.
- Foreign direct investment (FDI).
- Technology transfer.
- Improved product quality.
Criticisms
- Exploit cheap labor.
- Profit repatriation.
- Can dominate local markets and influence economic policies.
7. Public-Private Partnership (PPP)
A relatively modern model where public and private sectors collaborate on large-scale infrastructure or service projects.
Benefits:
- Leverages private sector efficiency and public sector reach.
- Risk sharing.
- Faster project completion.
