NCERT Textbook: Public, Private and Global Enterprises | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Chapter 3
Private , Public and Global e nter Prises LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept and characteristics of business;
•	
explain the features of different forms of public enterprises viz., 
departmental, statutory corporations and government companies;
•	
critically examine the changing role of the public sector;
•	
explain the features of global enterprises; and
•	
appreciate 	the	benefits 	of 	joint 	ventures.
Chapter 3.indd   57 31-12-2020   11:54:45
2024-25
Page 2


Chapter 3
Private , Public and Global e nter Prises LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept and characteristics of business;
•	
explain the features of different forms of public enterprises viz., 
departmental, statutory corporations and government companies;
•	
critically examine the changing role of the public sector;
•	
explain the features of global enterprises; and
•	
appreciate 	the	benefits 	of 	joint 	ventures.
Chapter 3.indd   57 31-12-2020   11:54:45
2024-25
58 BUSINESS  STUDIES
3.1 Introduct Ion You must have come across all types 
of business organisations in your 
daily life. In your neighbourhood 
market, there are shops owned by sole 
proprietors or big retail organisations 
run by a company. Then there are 
people providing you services like 
legal services, medical services, being 
owned by more than one person 
i.e., partnership firms. These are 
all privately owned organisations. 
Similarly, there are other offices 
or places of business which may 
be owned by the government. For 
example, Railways is an organisation 
wholly owned and managed by the 
government. The post office, in your 
locality is owned by the Post and 
Telegraph Department, Government 
of India, though our dependence on 
their postal services, particularly in 
cities and towns has been greatly  
reduced. This is because of plenty of 
private courier services firms operating 
in bigger towns. Then there are 
businesses which operate in more 
than one country known as global 
enterprises. Therefore, you may have 
observed that all types of organisations 
are doing business in the country 
whether they are public, private or 
global.
3.2 Pr Ivate Sector and Publ Ic 
Sector The private sector consists of 
business owned by individuals or 
a group of individuals, as you have 
learnt in the previous chapter. The 
various forms of organisation are 
sole proprietorship, partnership, 
joint Hindu family, cooperative 
and company.
Anita, a student of Class XI, was going through some newspapers. The headlines 
stared at her face, Government plans to disinvest its shares in a few companies. 
The next day there was another news item on one public sector company incurring 
heavy losses and the proposal for closing the same. In contrast to this, she read 
another item on how some of the companies under the private sector were doing 
so well. She was actually curious to know what these terms like public sector, 
disinvestment, privatisation meant.
She learnt there are all kinds of business organisation-small or large, industrial 
or trading, privately owned or government owned existing in our country. These 
organisations affect our daily economic life and therefore become part of the 
Indian economy. Since the Indian economy consists of both privately owned and 
government owned business enterprises, it is known as a mixed economy. The 
Government of India has opted for a mixed economy where both private and 
government enterprises are allowed to operate. The economy, therefore, may be 
classified into two sectors, viz., private sector and public sector. 
Then there are businesses which operate in more than one country known as 
global enterprises. Therefore, you may have observed that all types of organisations 
are doing business in the country whether they are public, private or global.
Chapter 3.indd   58 13-01-2021   11:15:54
2024-25
Page 3


Chapter 3
Private , Public and Global e nter Prises LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept and characteristics of business;
•	
explain the features of different forms of public enterprises viz., 
departmental, statutory corporations and government companies;
•	
critically examine the changing role of the public sector;
•	
explain the features of global enterprises; and
•	
appreciate 	the	benefits 	of 	joint 	ventures.
Chapter 3.indd   57 31-12-2020   11:54:45
2024-25
58 BUSINESS  STUDIES
3.1 Introduct Ion You must have come across all types 
of business organisations in your 
daily life. In your neighbourhood 
market, there are shops owned by sole 
proprietors or big retail organisations 
run by a company. Then there are 
people providing you services like 
legal services, medical services, being 
owned by more than one person 
i.e., partnership firms. These are 
all privately owned organisations. 
Similarly, there are other offices 
or places of business which may 
be owned by the government. For 
example, Railways is an organisation 
wholly owned and managed by the 
government. The post office, in your 
locality is owned by the Post and 
Telegraph Department, Government 
of India, though our dependence on 
their postal services, particularly in 
cities and towns has been greatly  
reduced. This is because of plenty of 
private courier services firms operating 
in bigger towns. Then there are 
businesses which operate in more 
than one country known as global 
enterprises. Therefore, you may have 
observed that all types of organisations 
are doing business in the country 
whether they are public, private or 
global.
3.2 Pr Ivate Sector and Publ Ic 
Sector The private sector consists of 
business owned by individuals or 
a group of individuals, as you have 
learnt in the previous chapter. The 
various forms of organisation are 
sole proprietorship, partnership, 
joint Hindu family, cooperative 
and company.
Anita, a student of Class XI, was going through some newspapers. The headlines 
stared at her face, Government plans to disinvest its shares in a few companies. 
The next day there was another news item on one public sector company incurring 
heavy losses and the proposal for closing the same. In contrast to this, she read 
another item on how some of the companies under the private sector were doing 
so well. She was actually curious to know what these terms like public sector, 
disinvestment, privatisation meant.
She learnt there are all kinds of business organisation-small or large, industrial 
or trading, privately owned or government owned existing in our country. These 
organisations affect our daily economic life and therefore become part of the 
Indian economy. Since the Indian economy consists of both privately owned and 
government owned business enterprises, it is known as a mixed economy. The 
Government of India has opted for a mixed economy where both private and 
government enterprises are allowed to operate. The economy, therefore, may be 
classified into two sectors, viz., private sector and public sector. 
Then there are businesses which operate in more than one country known as 
global enterprises. Therefore, you may have observed that all types of organisations 
are doing business in the country whether they are public, private or global.
Chapter 3.indd   58 13-01-2021   11:15:54
2024-25
59 PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
The public sector consists of 
various organisations owned and 
managed by the government. These 
organisations may either be partly or 
wholly owned by the central or state 
government. They may also be a part 
of the ministry or come into existence 
by a Special Act of the Parliament. The 
government, through these enterprises 
participates in the economic activities 
of the country.
The government in its industrial 
policy resolutions, from time-to-
time,	 defines 	 the 	 area	 of 	 activities	 in	
which the private sector and public 
sector are allowed to operate. In the 
Industrial Policy Resolution 1948, 
the	 Government 	 of 	 India	 had	 specified 	
the approach towards development of 
the industrial sector. The roles of the 
private and public sector were clearly 
defined 	 and	 the	 government	 through	
various Acts and Regulations was 
overseeing the economic activities of 
both the private and public sector. 
The Industrial Policy Resolution, 1956 
had	 also 	 laid	 down	 certain	 objectives 	
for the public sector to follow so as 
to accelerate the rate of growth and 
industrialisation. The public sector 
was given a lot of importance but at 
the same time mutual dependency 
of public and private sectors was 
emphasised. The 1991 industrial policy 
was radically different from all the 
earlier policies where the government 
was deliberating disinvestment of 
public sector and allowing greater 
freedom to the private sector. At the 
same time, foreign direct investment 
was invited from business houses 
outside India. Thus, multinational 
corporations or global enterprises 
which operate in more than one 
country gained entry into the Indian 
economy. Thus, we have public sector 
units, private sector enterprises and 
global enterprises coexisting in the 
Indian economy.
3.3 Forms o F o r Ganisin G Public 
s ector e nter Prises Government’s participation in business 
and economic sectors of the country 
needs some kind of organisational 
framework to function. You have 
studied about the forms of business 
organisation in the private sector 
viz., sole proprietorship, partnership, 
H indu 	 undivided 	 famil y, 	 cooperative 	
and company.
In the public sector, as it grows, an 
important question arises in respect of 
how it is to be organised or what form 
of organisation it should take. The 
gover nm ent 	 has 	 a 	 m aj or 	 r ol e	 t o 	 pl ay 	 i n 	
the formation of the public sector. But 
the government acts through its people, 
its 	 offices, 	 employees 	 and 	 they 	 take	
decisions on behalf of the government. 
For this purpose, public enterprises 
were formed by the government to 
participate in the economic activities 
of the country. They are expected 
to contribute to the economic deve-
lopment of the country in today’s 
liberalised, competitive world. These 
public enterprises are owned by 
the public and are accountable to 
the public through the Parliament. 
They are characterised by public 
Chapter 3.indd   59 31-12-2020   11:54:45
2024-25
Page 4


Chapter 3
Private , Public and Global e nter Prises LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept and characteristics of business;
•	
explain the features of different forms of public enterprises viz., 
departmental, statutory corporations and government companies;
•	
critically examine the changing role of the public sector;
•	
explain the features of global enterprises; and
•	
appreciate 	the	benefits 	of 	joint 	ventures.
Chapter 3.indd   57 31-12-2020   11:54:45
2024-25
58 BUSINESS  STUDIES
3.1 Introduct Ion You must have come across all types 
of business organisations in your 
daily life. In your neighbourhood 
market, there are shops owned by sole 
proprietors or big retail organisations 
run by a company. Then there are 
people providing you services like 
legal services, medical services, being 
owned by more than one person 
i.e., partnership firms. These are 
all privately owned organisations. 
Similarly, there are other offices 
or places of business which may 
be owned by the government. For 
example, Railways is an organisation 
wholly owned and managed by the 
government. The post office, in your 
locality is owned by the Post and 
Telegraph Department, Government 
of India, though our dependence on 
their postal services, particularly in 
cities and towns has been greatly  
reduced. This is because of plenty of 
private courier services firms operating 
in bigger towns. Then there are 
businesses which operate in more 
than one country known as global 
enterprises. Therefore, you may have 
observed that all types of organisations 
are doing business in the country 
whether they are public, private or 
global.
3.2 Pr Ivate Sector and Publ Ic 
Sector The private sector consists of 
business owned by individuals or 
a group of individuals, as you have 
learnt in the previous chapter. The 
various forms of organisation are 
sole proprietorship, partnership, 
joint Hindu family, cooperative 
and company.
Anita, a student of Class XI, was going through some newspapers. The headlines 
stared at her face, Government plans to disinvest its shares in a few companies. 
The next day there was another news item on one public sector company incurring 
heavy losses and the proposal for closing the same. In contrast to this, she read 
another item on how some of the companies under the private sector were doing 
so well. She was actually curious to know what these terms like public sector, 
disinvestment, privatisation meant.
She learnt there are all kinds of business organisation-small or large, industrial 
or trading, privately owned or government owned existing in our country. These 
organisations affect our daily economic life and therefore become part of the 
Indian economy. Since the Indian economy consists of both privately owned and 
government owned business enterprises, it is known as a mixed economy. The 
Government of India has opted for a mixed economy where both private and 
government enterprises are allowed to operate. The economy, therefore, may be 
classified into two sectors, viz., private sector and public sector. 
Then there are businesses which operate in more than one country known as 
global enterprises. Therefore, you may have observed that all types of organisations 
are doing business in the country whether they are public, private or global.
Chapter 3.indd   58 13-01-2021   11:15:54
2024-25
59 PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
The public sector consists of 
various organisations owned and 
managed by the government. These 
organisations may either be partly or 
wholly owned by the central or state 
government. They may also be a part 
of the ministry or come into existence 
by a Special Act of the Parliament. The 
government, through these enterprises 
participates in the economic activities 
of the country.
The government in its industrial 
policy resolutions, from time-to-
time,	 defines 	 the 	 area	 of 	 activities	 in	
which the private sector and public 
sector are allowed to operate. In the 
Industrial Policy Resolution 1948, 
the	 Government 	 of 	 India	 had	 specified 	
the approach towards development of 
the industrial sector. The roles of the 
private and public sector were clearly 
defined 	 and	 the	 government	 through	
various Acts and Regulations was 
overseeing the economic activities of 
both the private and public sector. 
The Industrial Policy Resolution, 1956 
had	 also 	 laid	 down	 certain	 objectives 	
for the public sector to follow so as 
to accelerate the rate of growth and 
industrialisation. The public sector 
was given a lot of importance but at 
the same time mutual dependency 
of public and private sectors was 
emphasised. The 1991 industrial policy 
was radically different from all the 
earlier policies where the government 
was deliberating disinvestment of 
public sector and allowing greater 
freedom to the private sector. At the 
same time, foreign direct investment 
was invited from business houses 
outside India. Thus, multinational 
corporations or global enterprises 
which operate in more than one 
country gained entry into the Indian 
economy. Thus, we have public sector 
units, private sector enterprises and 
global enterprises coexisting in the 
Indian economy.
3.3 Forms o F o r Ganisin G Public 
s ector e nter Prises Government’s participation in business 
and economic sectors of the country 
needs some kind of organisational 
framework to function. You have 
studied about the forms of business 
organisation in the private sector 
viz., sole proprietorship, partnership, 
H indu 	 undivided 	 famil y, 	 cooperative 	
and company.
In the public sector, as it grows, an 
important question arises in respect of 
how it is to be organised or what form 
of organisation it should take. The 
gover nm ent 	 has 	 a 	 m aj or 	 r ol e	 t o 	 pl ay 	 i n 	
the formation of the public sector. But 
the government acts through its people, 
its 	 offices, 	 employees 	 and 	 they 	 take	
decisions on behalf of the government. 
For this purpose, public enterprises 
were formed by the government to 
participate in the economic activities 
of the country. They are expected 
to contribute to the economic deve-
lopment of the country in today’s 
liberalised, competitive world. These 
public enterprises are owned by 
the public and are accountable to 
the public through the Parliament. 
They are characterised by public 
Chapter 3.indd   59 31-12-2020   11:54:45
2024-25
60 BUSINESS  STUDIES
ownership, public funds being used for 
its activities and public accountability.
A public enterprise may take 
any particular form of organisation 
depending upon the nature of its 
operations and their relationship with 
the government. The suitability of a 
particular form of organisation would 
depend upon its requirements. At the 
same time, in accordance with general 
principles, any organisation in the public 
sector should ensure organisational 
performance productivity and quality 
standards.
The forms of organisation which 
a public enterprise may take are as 
follows:
 (i) Departmental undertaking
 (ii) Statutory corporation
 (iii) Government company
3.3.1 Departmental Undertakings
This is the oldest and most traditional 
form of organising public enterprises. 
These enterprises are established as 
departments of the ministry and are 
considered part or an extension of 
the ministry itself. The Government 
functions through these departments 
and the activities performed by them 
are an integral part of the functioning 
of the government. They have not 
been constituted as autonomous or 
independent institutions and as such 
are not independent legal entities. 
They act through the officers of 
the Government and its employees 
are Government employees. These 
undertakings may be under the 
central or the state government and 
the rules of central/state government 
are applicable. Examples of these 
Indian Economy
Public Sector Private Sector
Departmental
Undertakings
Statutory
Corporation
Government
Companies
Private
(Ltd.)
Sole
Properietorship
Partnership Joint
Hindu
Family
Cooperative
Company
Public
(Ltd.)
Multinational
Corporations
Chapter 3.indd   60 31-12-2020   11:54:45
2024-25
Page 5


Chapter 3
Private , Public and Global e nter Prises LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept and characteristics of business;
•	
explain the features of different forms of public enterprises viz., 
departmental, statutory corporations and government companies;
•	
critically examine the changing role of the public sector;
•	
explain the features of global enterprises; and
•	
appreciate 	the	benefits 	of 	joint 	ventures.
Chapter 3.indd   57 31-12-2020   11:54:45
2024-25
58 BUSINESS  STUDIES
3.1 Introduct Ion You must have come across all types 
of business organisations in your 
daily life. In your neighbourhood 
market, there are shops owned by sole 
proprietors or big retail organisations 
run by a company. Then there are 
people providing you services like 
legal services, medical services, being 
owned by more than one person 
i.e., partnership firms. These are 
all privately owned organisations. 
Similarly, there are other offices 
or places of business which may 
be owned by the government. For 
example, Railways is an organisation 
wholly owned and managed by the 
government. The post office, in your 
locality is owned by the Post and 
Telegraph Department, Government 
of India, though our dependence on 
their postal services, particularly in 
cities and towns has been greatly  
reduced. This is because of plenty of 
private courier services firms operating 
in bigger towns. Then there are 
businesses which operate in more 
than one country known as global 
enterprises. Therefore, you may have 
observed that all types of organisations 
are doing business in the country 
whether they are public, private or 
global.
3.2 Pr Ivate Sector and Publ Ic 
Sector The private sector consists of 
business owned by individuals or 
a group of individuals, as you have 
learnt in the previous chapter. The 
various forms of organisation are 
sole proprietorship, partnership, 
joint Hindu family, cooperative 
and company.
Anita, a student of Class XI, was going through some newspapers. The headlines 
stared at her face, Government plans to disinvest its shares in a few companies. 
The next day there was another news item on one public sector company incurring 
heavy losses and the proposal for closing the same. In contrast to this, she read 
another item on how some of the companies under the private sector were doing 
so well. She was actually curious to know what these terms like public sector, 
disinvestment, privatisation meant.
She learnt there are all kinds of business organisation-small or large, industrial 
or trading, privately owned or government owned existing in our country. These 
organisations affect our daily economic life and therefore become part of the 
Indian economy. Since the Indian economy consists of both privately owned and 
government owned business enterprises, it is known as a mixed economy. The 
Government of India has opted for a mixed economy where both private and 
government enterprises are allowed to operate. The economy, therefore, may be 
classified into two sectors, viz., private sector and public sector. 
Then there are businesses which operate in more than one country known as 
global enterprises. Therefore, you may have observed that all types of organisations 
are doing business in the country whether they are public, private or global.
Chapter 3.indd   58 13-01-2021   11:15:54
2024-25
59 PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
The public sector consists of 
various organisations owned and 
managed by the government. These 
organisations may either be partly or 
wholly owned by the central or state 
government. They may also be a part 
of the ministry or come into existence 
by a Special Act of the Parliament. The 
government, through these enterprises 
participates in the economic activities 
of the country.
The government in its industrial 
policy resolutions, from time-to-
time,	 defines 	 the 	 area	 of 	 activities	 in	
which the private sector and public 
sector are allowed to operate. In the 
Industrial Policy Resolution 1948, 
the	 Government 	 of 	 India	 had	 specified 	
the approach towards development of 
the industrial sector. The roles of the 
private and public sector were clearly 
defined 	 and	 the	 government	 through	
various Acts and Regulations was 
overseeing the economic activities of 
both the private and public sector. 
The Industrial Policy Resolution, 1956 
had	 also 	 laid	 down	 certain	 objectives 	
for the public sector to follow so as 
to accelerate the rate of growth and 
industrialisation. The public sector 
was given a lot of importance but at 
the same time mutual dependency 
of public and private sectors was 
emphasised. The 1991 industrial policy 
was radically different from all the 
earlier policies where the government 
was deliberating disinvestment of 
public sector and allowing greater 
freedom to the private sector. At the 
same time, foreign direct investment 
was invited from business houses 
outside India. Thus, multinational 
corporations or global enterprises 
which operate in more than one 
country gained entry into the Indian 
economy. Thus, we have public sector 
units, private sector enterprises and 
global enterprises coexisting in the 
Indian economy.
3.3 Forms o F o r Ganisin G Public 
s ector e nter Prises Government’s participation in business 
and economic sectors of the country 
needs some kind of organisational 
framework to function. You have 
studied about the forms of business 
organisation in the private sector 
viz., sole proprietorship, partnership, 
H indu 	 undivided 	 famil y, 	 cooperative 	
and company.
In the public sector, as it grows, an 
important question arises in respect of 
how it is to be organised or what form 
of organisation it should take. The 
gover nm ent 	 has 	 a 	 m aj or 	 r ol e	 t o 	 pl ay 	 i n 	
the formation of the public sector. But 
the government acts through its people, 
its 	 offices, 	 employees 	 and 	 they 	 take	
decisions on behalf of the government. 
For this purpose, public enterprises 
were formed by the government to 
participate in the economic activities 
of the country. They are expected 
to contribute to the economic deve-
lopment of the country in today’s 
liberalised, competitive world. These 
public enterprises are owned by 
the public and are accountable to 
the public through the Parliament. 
They are characterised by public 
Chapter 3.indd   59 31-12-2020   11:54:45
2024-25
60 BUSINESS  STUDIES
ownership, public funds being used for 
its activities and public accountability.
A public enterprise may take 
any particular form of organisation 
depending upon the nature of its 
operations and their relationship with 
the government. The suitability of a 
particular form of organisation would 
depend upon its requirements. At the 
same time, in accordance with general 
principles, any organisation in the public 
sector should ensure organisational 
performance productivity and quality 
standards.
The forms of organisation which 
a public enterprise may take are as 
follows:
 (i) Departmental undertaking
 (ii) Statutory corporation
 (iii) Government company
3.3.1 Departmental Undertakings
This is the oldest and most traditional 
form of organising public enterprises. 
These enterprises are established as 
departments of the ministry and are 
considered part or an extension of 
the ministry itself. The Government 
functions through these departments 
and the activities performed by them 
are an integral part of the functioning 
of the government. They have not 
been constituted as autonomous or 
independent institutions and as such 
are not independent legal entities. 
They act through the officers of 
the Government and its employees 
are Government employees. These 
undertakings may be under the 
central or the state government and 
the rules of central/state government 
are applicable. Examples of these 
Indian Economy
Public Sector Private Sector
Departmental
Undertakings
Statutory
Corporation
Government
Companies
Private
(Ltd.)
Sole
Properietorship
Partnership Joint
Hindu
Family
Cooperative
Company
Public
(Ltd.)
Multinational
Corporations
Chapter 3.indd   60 31-12-2020   11:54:45
2024-25
61 PRIVATE, PUBLIC AND GLOBAL ENTERPRISES
undertakings are railways and post 
and telegraph department.
Features
The main characteristics of 
Departmental undertakings are as 
follows:
 (i) The funding of these enterprises 
come directly from the Govern-
ment Treasury and are an annual 
appropriation from the budget 
of the Government. The revenue 
earned by these is also paid into 
the treasury;
	 (ii)	 They 	 are 	 subject 	 to 	 accounting	
and audit controls applicable to 
other Government activities;
 (iii) The employees of the enterprise 
are Government servants and 
their recruitment and conditions 
of service are the same as that of 
other employees directly under 
the Government. They are headed 
by Indian Administrative Service 
( I AS) 	 of ficers 	 and 	 ci vi l 	 servants	
who are transferable from one 
ministry to another;
 (iv) It is generally considered to be 
a 	 major 	 su b division 	 of 	 th e	
Government department and is 
subj ect 	 t o 	 di r e ct 	 cont r ol 	 of 	 t he	
ministry;
 (v) They are accountable to the 
ministry since their management 
is directly under the concerned 
ministry.
Merits
Departmental undertakings have 
certain advantages which are as 
follows:
 (i) These undertakings facilitate the 
Parliament to exercise effective 
control over their operations;
 (ii) These ensure a high degree of 
public accountability;
 (iii) The revenue earned by the 
enterprise goes directly to the 
treasury and hence is a source of 
income for the Government;
 (iv) Where national security is 
concerned, this form is most 
suitable since it is under the 
direct control and supervision of 
the concerned Ministry.
Limitations
This form of organisation suffers from 
serious drawbacks, some of which are 
as follows:
 (i) Departmental undertakings fail 
to provide flexibility, which is 
essential for the smooth  operation 
of business;
 (ii) The employees or heads of depart-
ments of such undertakings are 
not allowed to take independent 
decisions, without the approval 
of the ministry concerned. This 
leads to delays, in matters where 
prompt decisions are required;
 (iii) These enterprises are unable 
to take advantage of business 
opportunities. The bureaucrat’s 
over-cautious and conservative 
approval does not allow them to 
take risky ventures;
 (iv) There is red tapism in day-to-day 
operations and no action can be 
taken unless it goes through the 
proper channels of authority;
Chapter 3.indd   61 31-12-2020   11:54:45
2024-25