NCERT Solutions for Class 11 Business Studies Chapter 3: Private, Public and Global Enterprises

Chapter at a glance

Exercises – Short Answer Questions

Question SA – Q1

Explain the concept of public sector and private sector.

Answer

Private sector: consists of business units owned, managed and controlled by private individuals or groups. Their main aim is profit. Examples: sole proprietorships, partnerships, private and public limited companies (Reliance, Tata Motors), cooperatives.

Public sector: consists of enterprises owned, managed and controlled by the central, state or local government, either wholly or partly. Their main aim is public welfare along with reasonable profit. Examples: Indian Railways, SAIL, ONGC, LIC.

India follows a mixed economy, where both sectors coexist and contribute to economic development.

Question SA – Q2

State the various types of organisations in the private sector.

Answer

1. Sole proprietorship
2. Partnership (including Limited Liability Partnership)
3. Joint Hindu family business
4. Cooperative societies
5. Joint stock companies — private and public companies
6. Multinational corporations operating in India

Question SA – Q3

What are the different kinds of organisations that come under the public sector?

Answer

1. Departmental undertakings — run as departments of a ministry; financed by the government budget; employees are government servants. Example: Indian Railways, Posts and Telegraphs.
2. Statutory (public) corporations — set up by a special Act of Parliament or state legislature; separate legal entity with financial autonomy. Example: LIC, Food Corporation of India, ONGC (earlier).
3. Government companies — registered under the Companies Act in which the government holds at least 51% of paid-up capital. Example: SAIL, BHEL, Hindustan Aeronautics Ltd.

Question SA – Q4

List the names of some enterprises under the public sector and classify them.

Answer

Question SA – Q5

Why is the government company form of organisation preferred to other types in the public sector?

Answer

1. Easy formation — can be registered under the Companies Act without a special Act of Parliament.
2. Separate legal entity — can own property, enter contracts, sue and be sued in its own name.
3. Autonomy — management decisions are taken by its board of directors free from bureaucratic red tape and parliamentary interference.
4. Business-like functioning — can be run efficiently and flexibly, like private companies.
5. Private participation — private investors can hold up to 49% of shares, bringing capital and expertise.
6. Memorandum and articles can be changed easily as needed.

Question SA – Q6

How does the government maintain a regional balance in the country?

Answer

The government uses public sector enterprises to reduce regional disparities:

1. Location of PSUs in backward areas — e.g. steel plants at Bhilai, Rourkela, Durgapur, Bokaro were set up in less developed regions.
2. This creates employment and develops ancillary industries around the main unit.
3. Development of infrastructure — roads, power, water supply, townships — in these areas.
4. Incentives such as subsidies, tax concessions and cheap land for private industries in backward regions under its five-year plans.

Question SA – Q7

State the meaning of public private partnership.

Answer

Public Private Partnership (PPP) is an arrangement in which the government and private sector enterprises join hands to provide public infrastructure or services — such as roads, airports, power, hospitals, water supply, education. The government provides policy support, land and sometimes funds, while the private partner brings investment, technology and management expertise. Risks and rewards are shared according to the agreement, and the private partner is usually given the right to operate the project for a fixed period (e.g. Build-Operate-Transfer). Example: Delhi and Mumbai airports, several national highways.

Exercises – Long Answer Questions

Question LA – Q1

Describe the Industrial Policy 1991, towards the public sector.

Answer

The New Industrial Policy, 1991 changed the role of the public sector from dominant player to one focused on strategic and essential areas:

1. Reduction of reserved industries — industries reserved for the public sector were reduced from 17 to 8 (now only a few like atomic energy and railways), opening others to the private sector.
2. Disinvestment — part of the government’s shareholding in selected PSUs was sold to mutual funds, financial institutions, workers and the public to raise resources and improve performance.
3. Sick units and BIFR — chronically loss-making PSUs were referred to the Board for Industrial and Financial Reconstruction for revival or closure; workers’ interests were protected through voluntary retirement schemes.
4. Memorandum of Understanding (MoU) — greater autonomy was given to PSU managements, who are held accountable for specified results through MoUs with the government.

The aim was to make the public sector efficient, competitive and accountable.

Question LA – Q2

What was the role of the public sector before 1991?

Answer

Before 1991 the public sector was expected to take the lead in economic development:

1. Development of infrastructure — railways, roads, power, ports, telecommunications, which private investors were unwilling to finance.
2. Building heavy and basic industries — steel, heavy engineering, petroleum, fertilisers, requiring huge capital and long gestation.
3. Regional balance — establishing industries in backward regions.
4. Economies of scale — large plants for basic goods.
5. Check over concentration of economic power — preventing private monopolies and concentration of wealth.
6. Import substitution and self-reliance — producing goods within the country to save foreign exchange.
7. Employment generation and welfare of workers.

Question LA – Q3

Can the public sector companies compete with the private sector in terms of profits and efficiency? Give reasons for your answer.

Answer

Many public sector companies can and do compete — for example, ONGC, NTPC, Indian Oil, Coal India and SBI are among the most profitable firms in India — but on the whole PSUs face certain handicaps:

Why they can compete

1. Huge resources, experience and market share in key sectors.
2. Government support and credibility.
3. After 1991, greater autonomy through MoUs, listing on stock exchanges and accountability to shareholders.
4. Professionalised boards and modern technology in many units.

Why many fall behind

1. Multiple objectives — social goals like employment, regional balance and price control reduce profits.
2. Political and bureaucratic interference — delays in decisions.
3. Lack of incentives and accountability for managers.
4. Over-staffing and rigid rules.

Conclusion: With managerial autonomy, professional management and commercial orientation, public sector companies can match the private sector in profits and efficiency.

Question LA – Q4

Why are global enterprises considered superior to other business organisations?

Answer

Global enterprises (multinational corporations) are considered superior because of:

1. Huge capital resources — they can raise funds from many countries and markets.
2. Foreign collaboration — agreements for technology, brands and patents with local firms.
3. Advanced technology — they invest heavily in R&D and use the latest production methods.
4. Product innovation — continuous development of new products through research.
5. Marketing strategies — aggressive, global marketing and strong brand names.
6. Expansion of market territory — operations spread across many countries through subsidiaries and branches.
7. Centralised control — headquarters in the home country control global operations, ensuring uniform policies.

Question LA – Q5

What are the benefits of entering into joint ventures and public private partnership?

Answer

Benefits of joint ventures

1. Increased resources and capacity — pooling of finance and manpower.
2. Access to new markets and distribution networks of the partner.
3. Access to technology and technical know-how.
4. Innovation — combining ideas of partners.
5. Low cost of production (e.g. using cheaper inputs in host countries).
6. Established brand name of a partner reduces the time and cost of building goodwill.
7. Sharing of risks.

Benefits of Public Private Partnership

1. Government gets private capital and expertise, reducing the burden on the budget.
2. Faster and efficient completion of infrastructure projects.
3. Risk sharing — construction and operating risks are borne by the private partner.
4. Better quality services to the public through professional management.
5. Private partners get assured business opportunities and returns.

Topic checklist

• Private and public sector; mixed economy
• Departmental undertakings, statutory corporations, government companies — features, merits, limitations
• Changing role of the public sector; Industrial Policy 1991
• Global enterprises: features
• Joint ventures: types and benefits
• Public Private Partnership

Total questions answered: 12 of 12