Dimensions of Business Environment

Framework of industry

In India, the public and the private sector have coexisted in industrial activity, with the former dominant in certain sectors. The present trend is clearly toward a larger role for the private sector, with fresh public investments being more or less restricted to a few strategic and essential infrastructure areas. The government is also pursuing a policy of divestment of equity in public-sector enterprises outside these areas and dilution of its holding through fresh issues to the public, although privatization (in the sense of transfer of majority or complete ownership) is not yet a clearly stated policy. The majority of big businesses continue to be controlled by state-owned corporations, large family groups and multinationals. However, this dominance has started to dilute with the entry of nonresident Indian technocrats and successful first-generation entrepreneurs. In many substantial private-sector companies, promoters hold a minority stake but are able to retain control due to dispersal of balance holdings. The public financial institutions hold large chunks of equity in many major Indian private sector companies, but generally follow a policy of noninterference. India also has a significant base of closely held small and medium-size businesses supplying local and regional markets in competition with the national large-scale manufacturers. to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions.