CBSE Class 11 Business Studies Notes, Solved Questions Chapter 3 – Private, Public and Global Enterprises

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Class 11 Business Studies Notes for Chapter 3 – Private, Public and Global Enterprises

Get Class 11 Business Studies Notes, Questions and Practice Papers for Chapter 3 – Private, Public and Global Enterprises. Candidates who want to pass Class 11 with a good grade can use this article for Notes, Questions, and Practice Papers. 

We have provided access to the Class 11 Business Studies Notes, Important Questions and Practice Paper on Chapter 3 – Private, Public and Global Enterprises. You can practise the questions and check your answers using the solutions provided after each question.

Chapter Definitions and Short Notes

Chapter 3 – Private, Public and Global Enterprises – Short Notes and Definitions

Private and Public Sector Enterprises in India

In India, enterprises are categorised into private and public sectors based on ownership and management. Private sector enterprises are owned and managed by individuals or groups of individuals, focusing on profit-making and encompassing various forms like sole proprietorships, partnerships, joint Hindu family businesses, companies, cooperative societies, and multinational corporations.
Examples include Reliance Industries Ltd and Wipro Ltd. Public sector enterprises, on the other hand, are either partly or wholly owned and managed by the Central or State Government, or both. They aim to provide goods and services at reasonable prices, ensuring economic participation on behalf of the government.
These include entities like NTPC and Indian Railways, and they may be established by a special act of Parliament or be part of a ministry, focusing on economic development and accountability to the public.

Short Pointers:

  • Private Sector Enterprises: Owned by individuals or groups; include types like sole proprietorships, partnerships, companies, etc.
  • Public Sector Enterprises: Managed/owned by the government; aim to supply goods/services at fair prices, ensuring accountability and economic development.
  • Examples: Reliance Industries Ltd (Private), NTPC (Public).
  • Policy Involvement: The government defines the operational areas for both sectors through industrial policy resolutions, highlighting the significance of both sectors in the economy.
  • Economic Roles: The private sector focuses on profit, while the public sector aims at public welfare and economic development.

Organisational Forms of Public Sector Enterprises

Public sector enterprises in India are crucial for government participation in the economic and business sectors. These enterprises are structured in three main organisational forms to efficiently manage and operate within the economic framework of the country. These forms are Departmental Undertakings, Public or Statutory Corporations, and Government Companies. Each form has its unique characteristics, governance structure, and accountability mechanisms to the public and Parliament. Departmental Undertakings are directly managed by government departments, Public Corporations are established by a special act of Parliament, and Government Companies are registered under the Companies Act, with the government holding a majority stake. These organisational structures are designed to meet specific operational needs and contribute to the country’s economic development within a competitive global environment.

Short Pointers:

  • Three Forms: Departmental Undertakings, Statutory Corporations, Government Companies.
  • Departmental Undertakings: Managed directly by government departments.
  • Statutory Corporations: Created by special acts of Parliament.
  • Government Companies: Registered under the Companies Act with major government ownership.
  • Public Accountability: All forms are accountable to the public and Parliament.
  • Objective: To participate in economic activities and contribute to national development.
  • Selection Criteria: The form depends on the enterprise’s operational needs and its relationship with the government.
  • Governance and Management: Varies across the forms, tailored to ensure efficiency, productivity, and public service.

Departmental Undertakings in the Public Sector

Departmental Undertakings represent the oldest and most traditional organisational form of public sector enterprises in India. These entities operate directly under the control of either the Central or State Government, without any separate legal identity, functioning as integral parts of the government itself. Managed by government officials and following government rules, their operations are financed through government budgets, with revenues being returned to the government Treasury. Employees are considered government servants, including civil servants and Indian Administrative Service (IAS) officers, who are subject to civil service rules. Departmental undertakings are characterised by direct accountability to their respective ministries, making them highly integrated within government operations.

Example: Examples include the Railways and the Post and Telegraph Department, which are essential services provided directly by the government.

Short Pointers:

  • Oldest Public Sector Form: Integral part of the government with no separate legal identity.
  • Management and Control: Directly managed by government officials under a specific ministry.
  • Financing: Funded through government budgets, with revenues returned to the treasury.
  • Employees: These are government servants, including civil servants and IAS officers.
  • Accountability: Directly accountable to the respective ministry and subject to parliamentary control.
  • Merits: Effective control and accountability, suitable for services related to national security.
  • Limitations: Lack of flexibility, delays in decision-making, red tapism, political interference, and being often insensitive to consumer needs.

Public or Statutory Corporations

Public or Statutory Corporations are public enterprises established by a Special Act of Parliament, which outlines their powers, functions, and operational framework.
These corporations are unique because they combine government authority with the operational flexibility of private businesses. They are financially independent, capable of entering contracts, acquiring property in their name, and are responsible for their finances through revenues from services and goods, or borrowings.
Unlike government departments, they are not financed from the central budget, allowing them a degree of operational freedom not typically seen in other public sector forms. Employees of statutory corporations are not considered civil servants and operate under the corporation’s employment policies.

Examples: State Bank of India, Life Insurance Corporation of India.

Short Pointers:

  • Formation: Created by Special Act of Parliament.
  • Legal Status: Operates as a corporate body with powers to sue, be sued, and own property.
  • Financial Independence: Financed through own revenue or borrowings, not reliant on the government budget.
  • Operational Flexibility: Similar to private enterprises but with governmental authority.
  • Employee Status: Not government or civil servants; governed by the corporation’s own rules.
  • Merits: Operational independence, contributes to economic development, less government interference in finances.
  • Limitations: Despite theoretical autonomy, practical operations are often subject to rules and government interference, leading to corruption and inefficiencies.

Government Companies

A government company is a legal entity established under the Indian Companies Act, primarily for conducting business operations. It competes in the market just like private sector companies.
The defining feature of a government company is that the Central or any State Government, or both, hold not less than 51% of the paid-up share capital. These shares are acquired in the name of the President of India, granting the government significant control over the company’s management. Government companies operate with a degree of independence from government interference, allowing them flexibility in business operations. Examples include the Steel Authority of India Limited (SAIL).

Short Pointers:

  • Legal Basis: Registered under the Indian Companies Act.
  • Ownership: At least 51% of shares held by the government.
  • Operational Flexibility: Competes in the market like private companies.
  • Legal Entity: Can own property, enter contracts, and sue or be sued in its name.
  • Funding: Primarily from government shareholding; can also raise capital from the market.
  • Audit and Reporting: Subject to a special audit appointed by the Central Government; annual report presented in Parliament or State Legislature.
  • Employee Status: Not civil servants; employed under the company’s rules.
  • Merits: Legal independence, operational freedom, providing services/goods at reasonable prices.
  • Limitations: Often only nominally autonomous due to government and political interference, may evade direct parliamentary accountability.

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Joint Ventures

A joint venture is a strategic alliance where two or more business organisations—be they private, government-owned, or international companies—come together to achieve a common purpose and mutual benefit. This collaboration combines resources, expertise, and investments, with the intent of business expansion, developing new products, or entering new markets, especially abroad. Joint ventures are characterised by shared risks, rewards, and control, and can be established for both long-term relationships and short-term projects.
The specific terms and conditions of the partnership are outlined in a joint venture agreement to prevent conflicts. In international joint ventures, adherence to the provisions laid down by the governments of the involved countries is required. In India, joint ventures operate under the same regulations as domestic companies, without any separate legal framework.

Short Pointers:

  • Definition: Collaboration between two or more businesses for mutual benefit.
  • Purpose: Business expansion, new product development, market entry.
  • Characteristics: Shared resources, expertise, risks, and rewards.
  • Legal Framework: Governed by a joint venture agreement; in India, treated like domestic companies.
  • International Aspect: Must comply with international provisions when formed across countries.

Types of Joint Ventures

Joint ventures, a strategic alliance for business collaboration, are broadly classified into two types: Contractual Joint Ventures (CJVs) and Equity-based Joint Ventures (EJVs). A CJV does not result in the formation of a new business entity but is rather an agreement between parties to cooperate in a business venture without shared ownership. This type often resembles a franchisee relationship, where the parties bring in resources, share control to some extent, and commit to a long-term collaboration without transaction-to-transaction dealings.
On the other hand, an EJV involves creating or joining an existing business entity that is jointly owned and managed by the involved parties.
This includes shared management, responsibilities, profits, and losses, structured around a formal agreement or memorandum of understanding, which is crucial to outline the terms and prevent legal issues. Both types of joint ventures require careful negotiation of terms, considering the cultural and legal backgrounds of the parties, and stipulating obtaining all necessary governmental approvals.

Short Pointers:

  • Contractual Joint Venture (CJV): Collaboration without creating a new entity, resembling franchisee relationships; characterised by mutual intention, shared control, and long-term commitment.
  • Equity-based Joint Venture (EJV): Involves forming or joining a jointly owned business entity, with shared ownership, management, and financial responsibilities.
  • Key Elements for Both:
    • Mutual agreement and clear objectives.
    • Shared resources, control, and benefits.
    • Formal agreement (memorandum of understanding) outlining terms.
    • Necessary governmental approvals and licences.
  • Legal and Cultural Considerations: Essential in negotiations to prevent future complications.

Benefits of Joint Ventures

Joint ventures represent strategic partnerships where two or more business entities collaborate for mutual benefits, pooling resources, expertise, and market access to achieve common goals. The key advantages of engaging in a joint venture include increased resources and capacity, facilitating rapid growth and expansion. Access to new markets and distribution networks, especially across international borders, allows businesses to explore and capture new customer bases.
Additionally, joint ventures provide access to advanced technology and innovation, enhancing product quality and operational efficiency. The collaboration can lead to reduced production costs through economies of scale and access to low-cost raw materials and skilled labour.
Furthermore, partnering with an established brand leverages existing market goodwill, reducing the time and investment required for brand development and market penetration. These benefits collectively enhance competitive advantage, operational efficiency, and market reach for the involved entities.

Short Pointers:

  • Resource Pooling: Increases capacity and enables efficiency.
  • Market Access: Opens up new domestic and international markets.
  • Technology Sharing: Provides access to advanced production techniques and innovation.
  • Cost Reduction: Lowers production costs through shared investments and local advantages.
  • Brand Leverage: Utilises established brand names to save on marketing and distribution costs.
  • Overall Impact: Leads to growth, expansion, and enhanced competitiveness.

Establishing Joint Ventures in India

In India, forming a joint venture is considered an effective approach for businesses to collaborate, combining strengths and resources for mutual benefits. Joint ventures in India are governed in the same way as domestic companies, without specific separate legislation. However, when involving foreign partners or Non-Resident Indians (NRIs), government approval is mandatory.
This approval process is determined by whether the venture falls under the automatic route, requiring Reserve Bank of India (RBI) consent, or outside it, necessitating clearance from the Foreign Investment Promotion Board (FIPB). Joint ventures can be established through three primary methods: creating a new company where parties subscribe to shares in agreed proportions, transferring a business to a new entity in exchange for shares, or collaborating with existing companies where one party subscribes to shares. These frameworks allow for flexible partnership arrangements to leverage combined expertise, access to new markets, and enhanced financial and operational capacity.

Short Pointers:

  • Regulation: Treated as domestic companies, with specific approval processes for foreign involvement.
  • Approval Process: Automatic route (RBI approval) or non-automatic route (FIPB approval).
  • Formation Methods:
    • Creating a new joint venture company by subscribing to shares.
    • Transferring business to a new company against share issuance.
    • Collaborating with an existing company, with cash subscription to shares.
  • Strategic Benefits: Access to shared resources, market expansion, and mutual growth opportunities.

Public-Private Partnership (PPP)

Public-Private Partnership (PPP) is a collaborative framework where the public sector (government entities such as ministries, departments, municipalities, or state-owned enterprises) and the private sector (local or international businesses, investors with technical or financial expertise, NGOs, or community organisations) come together to finance, design, develop, and manage infrastructure facilities and services.
This model is designed to leverage the strengths of both sectors to fulfil public needs and ensure the efficient delivery of services.
In PPPs, private partners contribute capital, technology, and management skills, while public partners may offer subsidies, tax breaks, or asset transfers to facilitate the projects. PPP arrangements are typically established for a specific period and target large-scale and high-priority projects in sectors like power, water, transport, healthcare, and education, aiming for shared risks, revenues, and responsibilities between the public and private entities.

Short Pointers:

  • Framework: Collaboration between public sector and private entities.
  • Purpose: Efficient development and management of public services and infrastructure.
  • Contributions: Capital, technology, and expertise from the private sector; subsidies, assets, and regulatory support from the public sector.
  • Sectors Involved: Power, water, transport, healthcare, education, and more.
  • Benefits: Leverages strengths of both sectors, ensures service delivery and fulfils social obligations.
  • Arrangement Duration: Defined period with shared risks and revenues.
  • Global Application: Implemented worldwide in various sectors for efficient service delivery and infrastructure development.

NCERT Solutions

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

Short Answer Questions

  1. Explain the concept of public sector and private sector.

Answer: In the Indian economy, we have both public and private sectors coexisting because it’s a mixed economy. The private sector consists of businesses owned by individuals or groups of individuals. Examples include sole proprietorships, partnerships, joint Hindu family businesses, cooperative societies, and companies.

On the other hand, the public sector includes businesses owned and managed by the government. These enterprises may be partly or wholly owned by the Central or State Government, often with at least a 51% equity stake held by the government. Public sector enterprises can also be created through a special act of Parliament, like the Railways and the Post Office.

In essence, the public sector serves broader economic and social objectives, whereas the private sector primarily focuses on profit.

Mindmap to remember this answer:

  • Indian economy: Mixed economy Private sector: Owned by individuals/groups 
  • Examples: Sole proprietorship, partnership, joint Hindu family business, cooperative society, company 
  • Public sector: Owned/managed by the government Partly/wholly owned by Central/State Government (≥ 51% government equity) Created by special act of Parliament 
  • Examples: Railways, Post Office
  1. State the various types of organisations in the private sector.

Answer: In the private sector, there are various types of organisations, including:

  • Sole proprietorship: A business owned and managed by a single individual.
  • Partnership: A business owned by two or more individuals who share profits and losses.
  • Joint Hindu Family business: A business managed by members of a Hindu undivided family.
  • Company: An organisation registered under the Companies Act, which can be either a private or public company.
  • Cooperative society: A business organisation owned and operated by a group of individuals for their mutual benefit.

These different forms of organisations in the private sector cater to varying business needs and structures.

Mindmap to remember this answer:

Private sector organisations:

  • Sole proprietorship: Owned by one person
  • Partnership: Owned by two or more individuals
  • Joint Hindu Family business: Managed by a Hindu undivided family
  • Company: Registered under the Companies Act
  • Private/Public: Cooperative society Owned and operated by a group for mutual benefit
  1. What are the different kinds of organisations that come under the public sector?

Answer: The different kinds of organisations that come under the public sector are:

  • Departmental Undertakings: These are enterprises established as departments of the ministry and are considered part or an extension of the ministry itself. Examples include the Railways and the Post and Telegraph Department.
  • Statutory Corporations: These are public enterprises created by a Special Act of Parliament which defines their powers and functions. They are financially independent corporate bodies with control over a specific area or commercial activity. Examples include Life Insurance Corporation (LIC) and Food Corporation of India (FCI).
  • Government Companies: According to the Indian Companies Act, a government company is any company in which at least 51% of the paid-up capital is held by the Central Government, State Government, or both. They are established purely for business purposes. Examples include Bharat Heavy Electricals Limited (BHEL) and Steel Authority of India Limited (SAIL).

Mindmap to remember this answer:

Public sector organisations:

  • Departmental Undertakings: Established as departments of the ministry. Examples include Railways, Post and Telegraph Department.
  • Statutory Corporations: Created by a Special Act of Parliament. Financially independent corporate bodies. Examples include LIC, FCI.
  • Government Companies: At least 51% government ownership. Purely for business purposes. Examples include BHEL, SAIL.
  1. List the names of some enterprises under the public sector and classify them.

Answer: Some enterprises under the public sector and their classifications are:

  • Departmental Undertaking:
    • Indian Railways
    • Indian Post and Telegraph
  • Statutory Corporation:
    • Life Insurance Corporation (LIC) of India
    • State Trading Corporation
  • Government Company:
    • Steel Authority of India Limited (SAIL)
    • Bharat Heavy Electricals Limited (BHEL)

Mindmap to remember this answer:

Public Sector Enterprises:

  • Departmental Undertaking: Indian Railways, Indian Post and Telegraph
  • Statutory Corporation: Life Insurance Corporation (LIC), State Trading Corporation
  • Government Company: Steel Authority of India Limited (SAIL), Bharat Heavy Electricals Limited (BHEL)
  1. Why is the government company form of organisation preferred to other types in the public sector?

Answer: The government company form of organisation is preferred to other types in the public sector because of the following advantages:

  • Simple Procedure of Establishment: Government companies can be easily formed by following the procedure laid down by the Companies Act, without needing a bill to be passed by the Parliament or State Legislature.
  • Working on Business Principles: They operate on business principles and have financial and administrative independence. Their Board of Directors usually consists of professionals and reputed individuals.
  • Efficient Management: Government companies are more efficient in managing their business and more accountable than other public enterprises. Their annual report is presented before both Houses of Parliament.
  • Competition: They provide healthy competition to the private sector, ensuring good quality products are available to the public at reasonable prices.

Mindmap to remember this answer:

Government Company Form:

  • Simple Establishment: Companies Act procedure. No need for parliamentary approval.
  • Business Principles: Independent financial/administrative matters. Professional Board of Directors.
  • Efficient Management: Accountability. Annual report in Parliament.
  • Healthy Competition: Compete with private sector. Good quality products at reasonable prices.
  1. How does the government maintain a regional balance in the country?

Answer: The government maintains a regional balance in the country through strategic planning and setting up industries in backward regions. During the pre-independence period, industrial progress was limited to a few areas like port towns. After planning began in 1951, the government deliberately set up public sector industries in backward regions.

Four major steel plants were established in these areas to accelerate economic development, provide employment, and develop ancillary industries. For example, the Bhilai Steel Plant in Madhya Pradesh led to the growth of many small industries in the state.

By locating new enterprises in backward areas and preventing the mushrooming of private sector units in already advanced regions, the government ensures balanced regional development.

Mindmap to remember this answer:

Regional Balance by Government:

  • Pre-independence Period: Limited industrial progress. Mostly in port towns.
  • Post-1951 Planning: Special focus on backward regions. Set up public sector industries.
  • Steel Plants: Four major plants in backward regions. Accelerate economic development. Employment and ancillary industries. Example: Bhilai Steel Plant in Madhya Pradesh.
  • Balanced Regional Development: New enterprises in backward areas. Prevent mushrooming of private sector units in advanced regions.
  1. State the meaning of public private partnership.

Answer: Public Private Partnership (PPP) is a relationship between public and private entities to achieve a common goal in infrastructure and other services. The public partners, like government ministries, departments, or state-owned enterprises, team up with private businesses or investors to share resources, tasks, and risks. NGOs and community-based organisations may also be involved if they are directly affected by the project.

In a PPP, the government typically provides funding, assets, and local knowledge while ensuring social obligations and environmental standards are met. The private partners bring in their expertise in operations, management, and innovation to deliver efficient services. PPPs have been successful in areas like power generation, water supply, and transportation infrastructure.

Mindmap to remember this answer:

Public Private Partnership (PPP):

  • Definition: Relationship between public and private entities to achieve common goals in infrastructure/services.
  • Public Partners: Government ministries, departments, state-owned enterprises.
  • Private Partners: Businesses, investors (local/foreign), NGOs, community-based organisations (affected stakeholders).
  • Government Contribution: Funding, assets, local knowledge. Ensures social/environmental standards.
  • Private Contribution: Operations, management, innovation expertise.
  • Success Areas: Power generation/distribution, Water and sanitation, Transportation infrastructure (railways, roads).

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  1. Why are global enterprises considered superior to other business organisations?

Answer: Global enterprises, or multinational corporations, are considered superior to other business organisations due to several reasons:

  • Availability of Funds: They have immense financial resources and can raise funds from different sources like equity shares, debentures, and bonds. They can also borrow from international banks and financial institutions because they have high credibility.
  • Diversification of Risk: Operating in multiple countries allows global enterprises to spread their risk. Losses in one country can be compensated by profits in another.
  • Advanced Technology: These companies follow international standards and have superior technology and production methods, ensuring quality.
  • Research and Development (R&D): Their R&D departments are sophisticated and well-funded, enabling them to innovate regularly in both products and processes.
  • Marketing Strategies: Global enterprises use aggressive marketing strategies to manage their brands effectively. They possess global brand equity and a reliable market information system.
  • Wider Market Access: They operate in multiple countries through networks of subsidiaries, branches, and affiliates. This gives them wider market access compared to domestic firms.

Mindmap to remember this answer:

  • Availability of Funds: Raise funds (shares, bonds); Borrowing from banks; High credibility
  • Diversification of Risk: Operate in multiple countries; Compensate losses
  • Advanced Technology: International standards; Superior technology
  • Research and Development: Sophisticated departments; Product and process innovation
  • Marketing Strategies: Aggressive strategies; Global brand equity
  • Wider Market Access: Subsidiaries, branches, affiliates; International presence
  1. What are the benefits of entering into joint ventures and public private partnership?

Answer:

Benefits of Joint Ventures

Joint ventures offer significant benefits to both parties involved:

  • Increased Resources and Capacity: When two businesses join hands, the combined financial and human resources allow them to grow and expand more quickly and efficiently.
  • Access to New Markets and Distribution Networks: Foreign companies entering into a joint venture gain access to new markets and established distribution channels in the host country.
  • Access to Technology: Joint ventures provide access to advanced technology that is otherwise economically challenging to develop alone.
  • Low Cost of Production: International corporations investing in developing countries benefit from the low cost of raw materials and labour, producing high-quality products at a much lower cost.
  • Established Brand Name: By partnering with a well-known business, the joint venture benefits from the existing goodwill, reducing marketing costs.

Benefits of Public-Private Partnerships (PPP)

Public-private partnerships (PPP) also offer notable benefits:

  • Optimal Allocation of Tasks and Risks: The PPP model ensures that tasks, obligations, and risks are optimally allocated between the public and private sectors.
  • Infrastructure Development: PPPs help in developing vital infrastructure projects like power generation, water supply, and transportation efficiently.
  • Innovation and Efficiency: The private sector brings its expertise in operations and management, ensuring efficiency and innovative solutions.
  • Social Responsibility: The government’s role ensures that social obligations are fulfilled and that sector reforms are successfully implemented.
  • Access to Investment: The government’s contribution, through capital and asset transfers, supports the partnership and attracts private investment.

Mindmap to remember this answer

  • Joint Ventures: Increased Resources: Grow/expand quickly; Access to New Markets: Gain distribution networks; Access to Technology: Advanced tech → efficiency; Low Cost of Production: Raw materials, labour; Established Brand Name: Goodwill → marketing cost
  • Public-Private Partnerships (PPP): Optimal Allocation: Tasks/risks, public/private; Infrastructure Development: Power, water, roads; Innovation and Efficiency: Private sector expertise; Social Responsibility: Sector reforms; Access to Investment: Capital, assets, funding

MCQ Questions

Chapter 3 – Private, Public and Global Enterprises – MCQ Questions

MCQ Type Questions

  1. Which of the following is an example of a global enterprise?
(A) Post and Telegraph Department(B) Indian Railways
(C) Reliance Industries(D) Multinational corporations (MNCs)

Answer: (D) Multinational corporations (MNCs)

  1. Which type of business organization provides legal and medical services and is owned by more than one person?
(A) Sole Proprietorship(B) Statutory Corporation
(C) Partnership Firm(D) Departmental Undertaking

Answer: (C) Partnership Firm

  1. Which of the following is NOT a feature of the private sector?
(A) Owned by individuals or a group of individuals(B) Includes sole proprietorship and partnership
(C) Wholly owned by the central government(D) Includes joint Hindu family and cooperative

Answer: (C) Wholly owned by the central government

  1. What is the key focus of the 1991 Industrial Policy regarding the public sector?
(A) Establish more departmental undertakings(B) Encourage disinvestment and privatization
(C) Strengthen monopoly in the telecom sector(D) Increase the number of industries reserved for the public sector

Answer: (B) Encourage disinvestment and privatization

  1. Departmental undertakings are directly controlled by:
(A) A Special Act of Parliament(B) Central or State Government ministries
(C) The Board of Directors(D) Shareholders

Answer: (B) Central or State Government ministries

  1. Which of the following features is unique to Statutory Corporations?
(A) Subject to accounting and audit controls of government departments(B) Funded directly from the government treasury
(C) Set up under a Special Act of Parliament(D) Employees are government servants

Answer: (C) Set up under a Special Act of Parliament

  1. What is a significant advantage of a government company over other forms of public enterprises?
(A) Complete freedom from government control(B) Exempt from accounting and audit rules
(C) Established without requiring a separate Act in Parliament(D) Provides goods and services at extremely low prices

Answer: (C) Established without requiring a separate Act in Parliament

  1. In the 1991 Industrial Policy, the number of industries reserved for the public sector was reduced from 17 to:
(A) 5(B) 3
(C) 10(D) 8

Answer: (D) 8

  1. Which of the following was established to retrain or redeploy retrenched labour due to disinvestment of public sector units?
(A) Board for Industrial and Financial Reconstruction (BIFR)(B) National Renewal Fund
(C) Voluntary Retirement Scheme(D) National Labor Development Board

Answer: (B) National Renewal Fund

  1. What is a primary feature of global enterprises that distinguishes them from other companies?
(A) Limited product innovation(B) Centralized control from the parent company
(C) Only domestic marketing strategies(D) Regional market expansion

Answer: (B) Centralized control from the parent company

  1. Which of the following is an advantage of joint ventures?
(A) Reduced resources and capacity(B) Lower access to new markets
(C) Higher production costs(D) Increased innovation

Answer: (D) Increased innovation

  1. Which of the following is a key feature of Public-Private Partnership (PPP)?
(A) Solely managed by private partners(B) Allocates risks among public and private partners
(C) Focuses exclusively on foreign investment(D) Fully government-owned and controlled

Answer: (B) Allocates risks among public and private partners

  1. Which of the following is a limitation of departmental undertakings?
(A) High degree of flexibility in decision-making(B) Reduced government interference in operations
(C) Over-cautious and conservative decision-making(D) Independent legal entity status

Answer: (C) Over-cautious and conservative decision-making

  1. What is a primary characteristic of a government company?
(A) Set up under a Special Act of Parliament(B) Governed by the Companies Act, 2013
(C) Wholly funded by the government treasury(D) All employees are government servants

Answer: (B) Governed by the Companies Act, 2013

  1. Which of the following is an advantage of statutory corporations?
(A) Limited operational flexibility(B) Independence in decision-making
(C) Direct government control in daily operations(D) Subject to government audit procedures

Answer: (B) Independence in decision-making

  1. Which of the following was a primary objective of the public sector after India’s Independence?
(A) Development of basic infrastructure(B) Full privatization of industrial sectors
(C) Reduced investment in heavy industries(D) Expansion of the services sector

Answer: (A) Development of basic infrastructure

  1. The primary reason for setting up steel plants in backward areas after 1951 was to:
(A) Increase revenue for the government(B) Reduce the cost of steel production
(C) Remove regional disparities and accelerate economic development(D) Encourage export of steel products

Answer: (C) Remove regional disparities and accelerate economic development

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Very Short Answer Type Questions

Chapter 1 : Sociology and Society – Very Short Answer Type Questions

  1. What is the primary objective of privatising a public sector enterprise?
    Answer: Privatising public sector enterprises aims to release locked resources and improve efficiency.
  2. What is Public-Private Partnership (PPP)?
    Answer: PPP is a collaboration between government and private entities for infrastructure and services.
  3. Mention any two features of statutory corporations.
    Answer: Statutory corporations are created by Special Act and have financial independence.
  4. What is the concept involved in the sale of equity shares to the private and public sectors?
    Answer: Disinvestment involves selling equity shares to the private and public sectors.
  5. State two challenges faced by public sector enterprises before 1991.
    Answer: Public sector enterprises faced inefficiency and lack of autonomy before 1991.
  6. Give two features of global enterprises.
    Answer: Global enterprises have huge capital resources and advanced technology.
  7. What was the objective behind reducing the number of industries reserved for the public sector from 17 to 3?
    Answer: The objective was to increase competition and efficiency in the public sector.

  1. State one advantage that is driven by MNCs in India.
    Answer: MNCs bring advanced technology and innovation to India’s industries.
  2. Name any two types of joint ventures.
    Answer: Contractual Joint Venture (CJV) and Equity-based Joint Venture (EJV).
  3. Mention one feature of government companies that differentiates them from other forms of organisation.
    Answer: Government companies can enter contracts and acquire property in their own name.
  4. What is the primary reason for international corporations investing in India?
    Answer: Lower production costs attract international corporations to invest in India.
  5. Give one limitation of government companies.
    Answer: Government companies evade constitutional responsibility and aren’t directly answerable to Parliament.

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Short Answer Type Questions

Chapter 3 – Private, Public and Global Enterprises – Short Answer Type Questions

  1. What are the different types of business organisations you come across in daily life?

Answer: In daily life, we see sole proprietorships (small shops), partnerships (legal/medical services), private companies (big retail chains), and government-owned entities (Railways). Global enterprises are also present, operating across multiple countries.

Mindmap to remember this answer:

  • Private: Sole Proprietorship (small shops); Partnership (services); Companies (retail chains)
  • Public: Government-owned (Railways)
  • Global: Multinational corporations
  1. How do private courier services affect the traditional postal system?

Answer: Private courier services have reduced dependence on the traditional postal system, especially in cities, by offering faster and more efficient delivery. As a result, traditional postal services face strong competition.

Mindmap to remember this answer:

  • Private Couriers: Faster delivery; Efficient services
  • Traditional Postal System: Reduced dependence; Increased competition
  1. Differentiate between the private and public sectors.

Answer: The private sector is owned by individuals/groups (sole proprietorship, partnership, company), while the public sector is government-owned (central/state). Public sector organisations include departmental undertakings, statutory corporations, and government companies.

Mindmap to remember this answer:

  • Private Sector: Sole Proprietorship; Partnership; Company
  • Public Sector: Departmental Undertakings; Statutory Corporations; Government Companies

  1. What role does the government play in industrial policy resolutions?

Answer: The government defines private/public sector roles through industrial policy resolutions, like the 1948, 1956, and 1991 policies, emphasising mutual dependence, public sector growth, disinvestment, and FDI encouragement.

Mindmap to remember this answer:

  • 1948 Policy: Private/public roles
  • 1956 Policy: Public sector growth
  • 1991 Policy: Disinvestment; FDI encouragement
  1. List the different forms of organising public sector enterprises.

Answer: Public sector enterprises can be organised as departmental undertakings, statutory corporations, or government companies.

Mindmap to remember this answer:

  • Forms:
    • Departmental Undertaking
    • Statutory Corporation
    • Government Company
  1. What are the main features of a departmental undertaking?

Answer: Departmental undertakings are directly funded by the government, audited like government activities, led by IAS officers, and managed as part of the government ministry. Examples include the Railways and Post Office.

Mindmap to remember this answer:

  • Features: Government funding; Audit controls; IAS-led; Ministry-controlled
  • Examples: Railways, Post Office

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Case Based Questions

Chapter 3 – Private, Public and Global Enterprises – Case Based Questions

Case 1: State Bank of India (SBI) has the most number of ATMs and the largest coverage network across India. Its penetration, particularly in rural sectors, and its customer base are well-documented. In 2005, SBI revamped its operations, modernising its banking processes to make them contemporary, technologically advanced, and customer-friendly, while shedding the outdated style of public sector banks. The bank has been growing annually at 16% and aims to increase its visibility among urban customers.

  1. Which form of public enterprise is SBI?

Answer: SBI is a statutory corporation, formed by passing the State Bank of India Act, 1955.

  1. What steps has SBI taken to project a new image for itself?
    Answer: SBI has modernised its banking operations with advanced technology and a customer-friendly approach. The bank aims to be contemporary by shedding the outdated style of working seen in other public sector banks.
  2. State two limitations and benefits of SBI as a statutory corporation.
    Answer:
    Benefits:
  • SBI enjoys independence and operational flexibility.
  • It provides banking services with a clear focus on public welfare.

Limitations:

  • There is government and political interference in decision-making.
  • Corruption may be present due to public dealings.

Case 2: Rainbows Ltd. is a travel and tour company headquartered in New York, with a global presence in 20 countries. It plans to open a branch in Mumbai, India.

  1. Identify which type of company Rainbows Ltd. is.
    Answer: Rainbows Ltd. is a Multinational Corporation (MNC).
  2. If Rainbows Ltd. opens its branch in Mumbai, identify two benefits that will accrue to India.
    Answer:
  • More job opportunities for Indians.
  • Inflow of foreign capital into the Indian economy.
  1. Discuss two features of a multinational corporation (MNC) exemplified by Rainbows Ltd.
    Answer:
  • Global Presence: Rainbows Ltd. operates in 20 countries.
  • Huge Capital Resources: It has significant resources to expand into new markets like India.

Case 3: LJMC was the first successful case of privatisation of a Central Public Sector Undertaking (CPSU). LJMC manufactured jute machinery and was incurring losses from 1996-97. Before privatisation, its net worth and annual turnover were both around ₹5 crore. In the initial stages of disinvestment, 74% of its stake was sold to a strategic partner.

  1. Write a short note on LJMC.
    Answer: Lagan Jute Machinery Company Limited (LJMC) is a Central Public Sector Undertaking (CPSU) that manufactures jute machinery. Before privatisation, its net worth and annual turnover were both around ₹5 crore.

  1. What is a holding company as referenced in this case?
    Answer: A holding company holds 51% or more equity in another company. In this case, LJMC is a subsidiary, and Bharat Bhari Udyog Nigam Limited (BBUNL) is the holding company.
  2. Discuss two key benefits of privatisation based on the LJMC case.
    Answer:
  • Increased Efficiency: Privatisation made LJMC more efficient and competitive.
  • Capital Inflow: Selling 74% of LJMC’s stake to a strategic partner brought in much-needed funds.

Case 4: Bharti and Airtel became dominant players in the telecom sector in 2005, with Airtel holding 15 million customers. Bharti Teletech, through its Beetel brand, established a strong presence in the landline sector. Additionally, Bharti Telesoft provided value-added services across the globe, while Bharti’s collaboration with Tele Tech Services India led to customer support outsourcing. Bharti also entered into a joint venture with ELRO Holdings to export farm-fresh produce.

  1. Explain the concept of a joint venture.
    Answer: A joint venture is when two or more companies pool their resources to achieve a common goal. They share risks, rewards, and control in an agreed manner.
  2. Name the various joint ventures Bharti has entered into.
    Answer:
  • Bharti and Airtel in the telecom sector.
  • Bharti and TeleTech Services India.
  • Bharti and ELRO Holdings for farm-fresh produce exports.
  1. What advantages can Bharti gain by entering into joint ventures with different organisations?
    Answer:
  • Access to new markets and distribution networks.
  • Advanced technology and innovation for better products.

Case 5: Apple Inc. is the fifth most popular MNC brand, known for its innovative smartphones. With a total revenue of $156 billion, the company is headquartered in California, USA, and operates in more than 50 countries. Founded by Steve Jobs in 1977, its core business includes computer hardware and software.

  1. Identify the form of business organisation Apple Inc. represents and discuss its characteristics.
    Answer: Apple Inc. is a Multinational Corporation (MNC). It operates in over 50 countries and generates huge revenue. It also features advanced technology, innovative products, and a global brand presence.
  2. State two features of an MNC as reflected in the case of Apple Inc.
    Answer:
  1. Huge Capital Resources: Revenue of $156 billion.
  2. Global Presence: Operations in more than 50 countries.
  1. Why are global enterprises significant in the Indian economy?
    Answer: Global enterprises bring advanced technology, create jobs, increase foreign investment, and improve the quality of goods and services, which significantly boost India’s economy.

Case 6: Hindustan Sanitaryware and Industries Ltd was established in 1962 as a joint venture with Twyfords of the UK, pioneering vitreous sanitaryware in India. The ‘Hindware’ brand commands more than one-third of the Indian market, and the company is rated among the top 300 Indian companies.

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Long Answer Type Questions

Chapter 3 – Private, Public and Global Enterprises – Long Answer Type Questions

  1. Explain the differences between public sector and private sector enterprises, highlighting their respective features, purposes, and government control.

Answer: Public sector enterprises are owned and managed by the government, either wholly or partly, while private sector enterprises are owned by individuals or a group of individuals. Public sector enterprises aim to promote economic development, ensure equitable distribution of wealth, and fulfil strategic objectives. In contrast, private sector enterprises prioritise profit maximisation and efficiency.

In the public sector, government control is extensive, involving regulations, policy directives, and direct supervision. Departmental undertakings like the Railways are directly under the ministry. Private sector control is less stringent, focusing on regulatory compliance rather than direct government involvement.

Public enterprises like statutory corporations and government companies possess a mix of operational autonomy and government control. For instance, statutory corporations like LIC are autonomous yet accountable to the government. Private companies, however, operate independently, subject to general business regulations.

Overall, public enterprises serve socio-economic purposes, whereas private enterprises focus on profit and growth.

Mindmap to remember this answer:

  • Public Sector: Government-owned, socio-economic goals, extensive control
    • Departmental Undertakings (e.g., Railways)
    • Statutory Corporations (e.g., LIC)
    • Government Companies (e.g., BHEL)
  • Private Sector: Individually-owned, profit-driven, less government control
    • Sole Proprietorships
    • Partnerships
    • Companies (e.g., Tata Group)
  1. Discuss the objectives of public sector enterprises and explain how their roles have evolved since the 1950s to the post-1991 era.

Answer: Public sector enterprises (PSEs) were established to promote economic development, achieve regional balance, prevent wealth concentration, and ensure import substitution. Initially, they played a crucial role in building the nation’s infrastructure and heavy industries.

In the 1950s, the government prioritised public sector investment through the Industrial Policy Resolutions of 1948 and 1956. PSEs were central to infrastructure development, achieving regional balance (e.g., steel plants in backward areas), and import substitution.

Post-1991, with economic liberalisation, the focus shifted towards privatisation and disinvestment. The number of industries reserved for the public sector was reduced, and private participation increased. Public sector reforms emphasised efficiency and profitability, introducing Memoranda of Understanding (MoUs) for performance accountability. Disinvestment and the closure of non-viable PSEs were promoted.

Thus, the role of PSEs evolved from drivers of industrialization to competitive market players.

Mindmap to remember this answer:

  • Objectives (Pre-1991): Economic development • regional balance • import substitution • Infrastructure development (e.g., steel plants) • Heavy industries • essential services 
  • Evolution (Post-1991): Liberalisation • privatisation • disinvestment • Reduced reservations for public sector • MoUs for accountability • Competitive market participation

  1. Define a departmental undertaking, and provide a detailed analysis of its features, merits, and limitations.

Answer: A departmental undertaking is a public enterprise managed directly by a government department, like Railways and the Post Office. It operates as an extension of the ministry, without independent legal status.

Features:

  • Funding: Directly from the government treasury.
  • Control: Subject to accounting and audit controls.
  • Staff: Employees are government servants.
  • Management: Managed by IAS officers, under direct ministry control.
  • Accountability: Answerable to the ministry and Parliament.

Merits:

  • Effective Control: Parliament exercises effective control over operations.
  • Public Accountability: High degree of public accountability.
  • Revenue: Revenue directly contributes to the treasury.
  • National Security: Suitable for sensitive sectors (e.g., defence).

Limitations:

  • Inflexibility: Lack of flexibility hinders smooth business operations.
  • Bureaucratic Delays: Decisions require ministry approval, leading to delays.
  • Risk-Averse: Bureaucratic caution prevents innovative decisions.
  • Red Tape: Excessive bureaucracy hampers efficiency.
  • Political Interference: Political influence affects operations.

Mindmap to remember this answer:

  • Features: Government treasury, audit controls, IAS officers
  • Merits: Parliamentary control, accountability, treasury revenue
  • Limitations: Inflexibility, delays, red tape, political interference
  1. Explain the meaning and features of a statutory corporation. Discuss its merits and limitations in the context of public enterprises.

Answer: A statutory corporation is a public enterprise created by a Special Act of Parliament, which defines its powers, functions, and relationship with government departments. Examples include LIC and Air India.

Features:

  • Legal Entity: Body corporate, can sue and be sued.
  • Ownership: Wholly owned by the government.
  • Finances: Independently financed through government and market borrowings.
  • Operational Flexibility: Operates with autonomy and policy flexibility.
  • Staff: Employees governed by the corporation’s own rules.

Merits:

  • Operational Flexibility: Greater independence in functioning and flexibility in policy-making.
  • Financial Autonomy: Funds are managed independently of the central budget.
  • Policy Autonomy: Formulates internal policies within the legislative framework.
  • Government Support: Combines government power with business initiative.

Limitations:

  • Government Interference: Political interference affects major decisions.
  • Corruption: Dealing with the public often leads to corruption.
  • Board Advisors: Government-appointed advisors curb operational autonomy.
  • Bureaucratic Delays: Board decisions often require government approval, leading to delays.

Mindmap to remember this answer:

  • Features: Legal entity, government-owned, flexible finance
  • Merits: Flexibility, financial autonomy, policy independence, government power
  • Limitations: Interference, corruption, advisors, delays

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Sample Questions Paper

Chapter 3 – Private, Public and Global Enterprises – Sample Questions Paper

Sample Questions :1

Time allowed: 2 hours Maximum Marks: 40

General Instructions:

  1. The question paper contains 14 questions.
  2. All questions are compulsory.
  3. Section A Questions 1 and 2 are 1 mark source-based questions. Answers should not exceed 10-15 words.
  4. Section B Questions 3 to 9 are 2 mark questions. Answers should not exceed 30 words.
  5. Section C Questions 10 to 12 are 4 mark questions. Answers should not exceed 80 words.
  6. Section D Questions 13 and 14 are 6 mark questions. Answers should not exceed 200 words.

Section A

  1. What is the difference between a departmental undertaking and a statutory corporation in the public sector? (1 mark)
  2. Mention one feature of a government company. (1 mark)

Section B

  1. Why was the public sector given importance in the initial stages after independence? (2 marks)
  2. What is disinvestment with respect to public sector enterprises? (2 marks)
  3. Define a global enterprise. (2 marks)
  4. What is an equity-based joint venture? (2 marks)
  5. State two benefits of joint ventures. (2 marks)
  6. What is the role of the public sector partner in a Public-Private Partnership model? (2 marks)
  7. State one sector where Public-Private Partnerships have been implemented worldwide. (2 marks)

Section C

  1. Distinguish between the features of a government company and a statutory corporation. (4 marks)
     OR
    Explain the merits and limitations of departmental undertakings.
  2. Discuss the objectives behind establishing public sector enterprises at the time of independence in India. (4 marks)
     OR
    How has the role of the public sector changed in India since the 1990s? Explain the major reforms introduced.
  3. Why do global enterprises enter into foreign collaborations? Explain the benefits they derive from such collaborations. (4 marks)
     OR
    Discuss the features that distinguish global enterprises from other business organisations.

Section D

  1. What were the reasons behind setting up public sector enterprises in India after independence? Explain the changing role of public sector enterprises since the 1990s. (6 marks)
     OR
    Differentiate between contractual joint ventures and equity-based joint ventures. Discuss the benefits that businesses can derive by entering into joint ventures.
  2. The public sector and private sector need to be viewed as mutually complementary parts. Explain this statement in the context of the industrial policy resolutions in India. (6 marks)
     OR
    What is a Public-Private Partnership (PPP) model? Discuss the roles of the public and private partners in such a partnership model.

Sample Questions :2

Time Allowed: 2 hours Maximum Marks: 40

General Instructions:

  1. The question paper contains 14 questions.
  2. All questions are compulsory.
  3. Section A Questions 1 and 2 are 1 mark source-based questions. Answers should not exceed 10-15 words.
  4. Section B Questions 3 to 9 are 2 marks questions. Answers should not exceed 30 words.
  5. Section C Questions 10 to 12 are 4 marks questions. Answers should not exceed 80 words.
  6. Section D Questions 13 and 14 are 6 marks questions. Answers should not exceed 200 words.

Section A

  1. What is the term used for business organisations that operate in multiple countries? (1 mark)
  2. What term is used for government-owned business organisations? (1 mark)

Section B

  1. State any two features of departmental undertakings. (2 marks)
  2. What is the role of public sector enterprises in developing infrastructure? (2 marks)
  3. Why were public sector enterprises set up in backward regions? (2 marks)
  4. What is the meaning of ‘joint venture’? (2 marks)
  5. Distinguish between contractual and equity joint ventures. (2 marks)
  6. What is the role of public partners in a Public Private Partnership model? (2 marks)
  7. In which sectors have Public Private Partnerships been implemented worldwide? (2 marks)

Section C

  1. Explain any two merits and two limitations of departmental undertakings. (4 marks)
     Or
    Describe the features of statutory corporations. (4 marks)
  2. What were the objectives behind setting up public sector enterprises in the Indian economy after independence? (4 marks)
     Or
    Discuss any four benefits of joint ventures for businesses. (4 marks)

Section D

  1. Elaborate on the changing role and policy of the government towards public sector enterprises since 1991. (6 marks)
     Or
    Describe the distinctive features that characterise global enterprises or multinational corporations. (6 marks)
  2. “The public sector acts as a check over the private sector to prevent concentration of economic power.” Analyse the statement in light of the role of the public sector in the Indian economy. (6 marks)
  3. Define a government company. Discuss its merits and limitations. (6 marks)

 

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