Public sector reservation
Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT
Meaning
Public sector reservation means only state enterprises may operate in certain industries, and private firms are kept out. India used it after Independence so that the state would control the "commanding heights", meaning the industries most vital to the economy. It matters because it decided where private firms could invest.
Example
Under IPR 1956, Schedule A had 17 industries that only the state could own. The 1991 reforms cut the list to 8. Today only 2 are left: atomic energy (specified activities) and railway operations. So defence production is no longer reserved for the public sector.
Don't confuse with
- Reservation for small-scale industry: this kept certain goods for small units, not for state firms.
- Nationalisation: this takes over firms that already exist. Reservation only restricts who can enter an industry.
Related concepts
- Industrial policy
- Capital goods industry
- Commanding heights
- Capital-intensive industrialisation
- Private sector
- Nationalisation