The correct option is 2 and 3 only.
Explanation
In the post-independence era, the public sector was assigned a dominant role in the Indian economy to drive industrialization and ensure social welfare. While it aimed to build infrastructure and heavy industries, its performance later faced criticism regarding inefficiency, over-expansion into non-strategic sectors, and financial viability.
Statement-wise Analysis:
- Statement 1 is Incorrect.
One of the primary criticisms of the public sector was that it did not restrict itself to strategic or heavy industries. The state entered the production of consumer goods and services, including bread (e.g., Modern Food Industries), shoes, and hotels. Critics argued that the government wasted resources on sectors where the private sector could have operated more efficiently. - Statement 2 is Correct.
Public sector undertakings (PSUs) were often treated as employment generators rather than profit-seeking entities. Consequently, many loss-making units were kept operational for years to protect the jobs of workers and avoid political backlash from trade unions, leading to a significant drain on the national exchequer. - Statement 3 is Correct.
The expansion of the public sector was explicitly intended to prevent the concentration of wealth and economic power in the hands of a few private individuals. This objective was enshrined in the Industrial Policy Resolution, 1956, and supported by regulations like the Monopolies and Restrictive Trade Practices (MRTP) Act.
Key Takeaway:
The pre-1991 public sector strategy was criticized for "over-reach" into non-essential consumer goods and for sustaining "sick" units to preserve employment, despite the original intent of preventing private monopolies.