The Indian economy performed impressively, even though not satisfactorily, during the period of first seven five-year plans. These plans spanned over a period from 1950 to 1990. Efforts taken during this period of first seven plans made our industries far more diversified. The policy of import substitution led to the protection of the domestic industries against the foreign producers but we failed to promote a strong export surplus. Since, the stress was being laid on the public investments in the industrial sector, public sector expanded to a large extent. But there was a lack of competition, innovation and modernization due to excessive government regulations. As a result, it could not bring desired level of improvement in the secondary sector. Many Public Sector Undertakings (PSU’s) incurred huge losses due to operational inefficiencies, red-tapism, poor technology and other similar reasons. On the Agricultural front, due to the measures taken under the Green Revolution, India, more or less became self-sufficient in the production of food grains. Due to above reasons and also change in the global economic scenario, the need for reform of economic policy was felt.

Which of the following was NOT a reason for the public sector to play a major role in the initial phase of Indian Economic Planning?

The government wanted to protect the indigenous producers from the foreign competition.

At the time of independence, Indian industrialists did not have the capital to undertake investment in industrial ventures required for the development of Indian economy; nor was the market big enough to encourage industrialists to undertake major projects even if they had the capital to do so. It is principally for these reasons that the erstwhile governments had to play an extensive role in promoting the industrial sector.  Further, public sector was meant to promote the welfare of the nation.