This chapter looks at the performance and market valuation of the Public Sector in India. Few studies on performance of PSUs are correct with regard to their methodology. These studies show that the performance of PSUs, for the most part, has been woefully below that of the private sector. The performance has been poor particularly in competitive sectors, and in sectors that are labour intensive. Many studies, though, have attempted to justify such performance on the ground that these enterprises have ‘multiple’ objectives, ‘non-commercial’ objectives, or social objectives; that they were set up to ‘lead’ or to develop sectors rather than make profits and so on. It is only in some sectors with administered prices, or where barriers to entry have been large that their performance seems to be possible. Markets, though, have undervalued their performance considerably—pointing to severe institutional constraints on their growth and performance.

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