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Difference between Public Sector and Private Sector

We have studied about many companies that produce several products in the public and private sectors. Several countries have adopted privatization as the public sector has taken aback. For better results, both the private sector and the public sector have to work hand in hand. They have to balance out tasks and work as partners. In order to develop the country, both these sectors are required to work simultaneously. It is interesting to note that there is always a competition going on in between these sectors. Therefore, it is essential for them to understand that both are the fundamental sources of growth and development of the country. Now, what do the private sector and public sector mean? And what are the significant contrasting points among them? Well, without further ado, let us begin by knowing the primary meanings of these terms.

Public Sector vs Private Sector

Public Sector

The public sector is the sector which includes both public companies and services. In other words, the public sector is the sector that is under government's control. The public sector includes agencies, enterprises, banks, companies, etc., that are controlled by the government. Some examples of the public sector include infrastructure, sewers, public transit, healthcare, goods, services, etc. The public sector is made of three parts, i.e., the judiciary, legislative, and executive. These three segments combine and make the private sector. One of the major aims of the public sector is to have a balance between economy and wealth. The public sector is under the state control. More or less, the companies and agencies under the public sector are owned by the state. Now, let us look at some contrasting points between these sectors.

Private Sector

The private sector is defined as the sector wherein the economy is controlled by private groups. In layman's terms, a private sector is the sector that is not under the control of the state. Private sectors are run by companies yielding profits. The private sector can also be called as the citizen sector. Examples of the private sector are ICICI Bank, ITC Limited, HDFC Bank, etc. Apart from the banks, the proprietors, businessmen, accountants, SMEs, etc., are some other examples of the private sector. The major objective of the private sector is to earn maximum profits and have sole ownership or control. The private banks have better management systems, due to which they are able to yield more profits. Some of the private companies include Vitol, Koch Industries, Huawei, etc.

1. The public sector is defined as the sector which is under government's control. The private sector is defined as a sector that is not under government's control.
2. The public sector has the main aim of obtaining a balance between wealth and economy. On the other hand, the major objective of the private sector is to earn profits.
3. The public sector does not have enough staff to work, but the workload is more as compared to the private sector. The public sector does not encounter such issues as they have better management systems.
4. The purpose of the private sector is to serve and help the citizens of the nation. Earning profits and sole ownership is the purpose of the private sector.
5. The public sector raises money from public revenue. Public revenue includes tax, duty, fine, etc. The private sector earns money by taking a loan or issuing debentures and shares.
6. The public sectors areas include:
  • Army
  • Police
  • Healthcare
  • Banking
  • Transit
  • Telecommunications
The private sector areas include:
  • Finance
  • Information Technology
  • Manufacturing
  • Pharmaceuticals
  • Banking
  • Mining
7. Public sectors provide a lot of benefits to their employees. Some of the benefits include:
  • Job Security
  • Retirement
  • Allowances
  • Pension Plans
Private sectors also provide some benefits. They are:
  • Good Salary
  • Competitive environment
  • Incentives
  • Promotion
  • High package
8. The employees are positioned and promoted at a seniority level. The employees are promoted based on their merit.
9. Public sectors provide a sense of stability in the job. There is no stability in the job of the private sector.
10. The public sectors are listed in the stock exchange markets. The private sectors are not listed in stock exchanges.

So, these are some of the contrasting points between the private and public sectors. There are certain types of private and public sectors. So, let us discuss them in detail.

Types of Public Sector Enterprises

  1. Departmental Undertakings: This is the oldest form of the public sector. The departmental undertakings are directly under the control of the government.
    It is considered as a combined department within the government. Examples of departmental undertakings include post, railway, telephone services, etc.
  2. Public Corporation: The public corporation is a corporation formed through a special act of the government. They can either be formed by the parliament or state legislature. Examples of public corporations include Indian airways, Food Corporation of India, Natural Gas Corporation, etc.
  3. Government Companies: The companies wherein 51% of the capital is provided by the government are called government companies. They are partly handled by the government. Examples of government companies include the steel authority of India, trading corporations, etc.

Types of Private Sector Enterprises

  1. Sole Proprietors: Sole proprietorship is the significant type of private-sector enterprise. These are generally small businesses owned by a particular person. The person owning the company is responsible for all the legal matters of the company/ business.
  2. Partnerships: Partnerships are almost the same as sole proprietors. The only difference is that the partnership includes multiple owners. The duties and responsibilities are divided among these partners.
  3. Limited Liability Companies (LLC): LLC is a significant organizational structure. This structure protects the assets of the enterprise. These companies are different from the above two companies in their taxing process.

All these three have many legal differences between them.

So, these are the major types of private sector and public sector enterprises. Both these sectors work hand in hand to economically develop the nation. The major difference between them is government control, i.e., the public sector is fully under the control of the government/ state, unlike the private sector. Thus, both public and private sectors are the fundamental sources of building the economy of the country.

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