What are the differences between Public and Private enterprises ?

In India we have a mixed economy where the public and private sectors are supposed to be supplementary as well as complementary to each other. They are to coexist peacefully. Both the types of enter­prises are to foster economic development in the country. However, one may notice certain points of difference between the two.

In India the history of public enterprises is more or less new. The experiment is still going on. But the history of private enterprise is very old.

The standard of efficiency for the two types of enterprises also is not the same. The success of a public enterprise is judged on the basis of economy and quality. But the standard by which a private enterprise is judged is profit.

From the above it follows that the promotion of public welfare is the most important objective for a public enterprise. Hence the prices charged by such an enterprise may be even below the cost of product. Public sector is for public good. But the primary objective of a private enterprise is invariably profit.

The management of a public enterprise is usually impersonal. The people in charge of the management of public enterprises have very little stake in the success of the enterprise. Irrespective of performance they enjoy a great deal of security. But the management of a private enterprise has to take a lot of interest and drive for the success of the enterprise.

Consult ICE: Transforming Enterprise Policy

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Private enterprises have to compete to survive. If an enterprise is not viable it has to wind up. But a public enterprise is protected from failure by implicit or explicit subsidies. Even the ‘sick’ units can operate under the public sector on political reasons. Similarly, a steel plant can be set up by the government only on political consideration. But private enterprises operate only and only on economic consideration.

Public undertakings are more or less under the control of the government. Therefore, in practice they are not as autonomous as the private enterprises. So the authority in charge of a public enterprise can not exercise his discretion in the same manner as the management of a private enterprise. “Rules and regulations in the matter of appointment, promotion, reduction, dismissal etc. are bound to be more rigid in a government owned and managed enterprise than in a private concern.

Besides, a public enterprise is supposed to be a model employer. Sometimes it might have a negative implication for a public enterprise. It may become less resistant to demand of labour, even if unjustified This is likely to lead to an inflated wage cost and price structure of a public enterprise. But a private enterprise does not suffer from such a drawback, although in the recent past, labour has become quite militant in the private sector as well.


Profit maximization being the goal of a private enterprise, it may adopt any means to promote that goal. It would not hesitate to follow unethical and anti-social practices such as, black marketing, hoarding, adulteration, etc. But public enterprises operate within the framework of a planned economy and they aim at maximization of public interest.

Another major difference between the two is that the private enter­prise is less exposed to public criticism than the public enterprise. A public enterprise has to face fierce light of publicity. “Not only the consu­mer is concerned with it, but also since it is the property of the nation, the taxpayer, the citizen, the Government and the Parliament, all regard it as worthy of notice and are anxious to know about its working and its results.”

Since today the bureaucracy plays a very important role in the management of the public sector as well as in the implementation of economic planning in a country.

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