The public sector has played a vital role in the economic development of India. Since from Independence public sector has been assigned a major role to give a kick start to the economy. To do this, public sector was given the responsibility of the functioning of key industries such as Iron and steel, Infrastructure etc. The major role of public sector enterprises includes:
1. Enhancing Nations Welfare: The main motive of the PSU was to provide goods and services that add to the welfare of the country as a whole. For example, schools, hospitals, electricity, etc. These services not only enhance welfare of countrys population but also enhance the future prospects of economic growth and development.
2. Long Gestation Projects: It was not feasible and economically viable for the private sectors to invest in the big and wide projects like basic industries and electricity, railways, roads, etc. This is because these projects need a very huge initial investment and have long gestation period. Hence, PSU is the most appropriate to invest in these projects.
3. Basic Framework: An important ideology that was inherited in the initial five year plans was that the public sector should lay down the basic framework for industrialisation that would encourage the private sector at the latter stage of industrialisation.