written by | May 27, 2022

Public Sector vs Private Sector: Examples and Differences

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Table of Content


The main distinction between public and private sector jobs is that public sector jobs are usually in a government organisation and private sector jobs are ones where non-governmental organisations employ employees. These include positions within private companies and various other kinds of business organisations.

If you're looking for work but aren't sure whether you want to work in the private or public sector, this guide will give you some helpful suggestions and tips about the different jobs in the respective sectors.

Did you know?

There were only five public sector enterprises in 1951 in India that the governments owned. However, in a recent study in March 2021, the number increased from 5 to 365 public enterprises in India. Also, the total investment was ₹16.41 lakh crores for building those public sector enterprises.

Also Read: Different Types of Industries- Primary, Secondary & Tertiary

Explanation of the Concept of Public Sector and Private Sector

In India, there is a mixed economy. Mixed economies are economic systems in which private and public enterprises coexist. Therefore, the economy can be divided into the private sector and the public sector. Business enterprises owned by individuals or groups of individuals constitute the private sector. Organisations can be sole proprietorships, partnerships, joint Hindu families, co-operatives, and companies. Business enterprises owned by governments constitute the public sector. It may be that either the Central Government or the State Government owns these organisations wholly or partly, with an equity stake of at least 51%. You can also create them by a Special Act of Parliament, or they can be a part of the ministry. In the public sector, the government is involved in the economic activity of the country. The government announces industrial policy resolutions from time to time to define which activities are allowed to be conducted by the private and public sectors.

What Is the Public Sector?

To start explaining the concept of the public sector and private sector, public sector organisations come in many different forms. They are responsible for implementing part of the government's policy. The public sector includes state-owned military organisations, enterprises, schools and hospitals. Public sector organisations do not have the incentive to earn profits and are inherently less productive.

They are responsible for regulating the economy and creating public and economic policies. Public sector organisations do not make profits, but they provide essential public goods. Public sector organisations rely on taxes to finance their operations, while private companies generate income. Moreover, there are numerous benefits to working in this sector. Generally, funding for public sector organisations comes from the budgetary process of the legislative body. Operating funds are allocated to specific current or immediate needs, and they rarely go into future markets. This means that the public sector performs services that the private sector could not do.

The Public Sector Business Types

The public sector is composed of companies controlled or owned by the government. Here are a few examples:

Public Purpose Corporations

These corporations are government-owned entities created to provide services to the public, much like non-profits. The library is an example of a public-purpose corporation established by the state government.

Public Authority

It's similar to a public purpose corporation. However, it has more power. Occasionally, it manages infrastructure projects. For instance, a city might be a housing authority which will provide affordable housing for residents.

Government Agencies

These are created and funded by the government and are responsible for managing/executing specific functions. This includes the central, state and city-based agencies.

Enterprises Owned by the State

A government-owned business is a government-owned entity created and is a part of commercial activities on behalf of the government. The government can have partial/full ownership of such companies.

What Is the Private Sector?

This is the economy section owned by private groups for profit or non-profit purposes. It is separate from the government, so it has the most autonomy. The private sector is also referred to as the citizen sector. This part of the economy provides jobs for the rest of us.

The private sector is the part of the economy that the government doesn't own, and it comprises sole traders, small to medium-sized enterprises and private companies.

The private sector is characterised by intense competition. These businesses try to gain market share by lowering costs and improving quality. In turn, consumers are free to switch to a competitor if they aren't satisfied with the quality of service of a particular company.

Financial institutions are only included in the private sector if private investors own them. However, it is possible to find both types of businesses. Private sector organisations are often partnerships or sole proprietorships, and private firms also produce and distribute products, services and other goods.

And since the private sector is highly competitive, there's no place for complacency in the workforce. In general, however, private firms tend to perform better than their governments, resulting in better employment conditions for the force.

The Private Sector Businesses Types

The private sector includes diverse industries. Here are some examples:

Sole Proprietorships

It's a business that is not operated and owned by one individual. A person who operates a flower shop can be a good illustration of a sole proprietorship.

Partnerships

The term "partnership" refers to an entity operated and owned by two or more persons. For instance, the law firm could be owned by several partners who co-own it and share the profits.

Small and Mid-Sized Companies

These companies will be identified by their assets, quantity of employees and income. Different countries distinguish them differently, as do the various industries in those countries.

Multinationals and Large Corporations

A corporation in India is classified as "large" if it has over 1000 employees. Multinational corporations have activities and assets across multiple countries, and many of the most famous corporations are examples of big multinationals/corporations, including Microsoft, Disney and Apple.

Trade and Professional Associations

Trade and professional associations cater to certain groups of people, usually related to their occupation or field of work.

Trade Unions

They are the organisations created by people who work in the same field or sector. Trade unions seek to defend and enhance their members' rights.

Also, you can know how to apply for a business loan if you lack investment in opening a business.

Also Read: Government E-marketplace - How to Do Gem Portal Registration Explained

The Key Differences Between the Public and Private Sectors

Basis for Comparison

Public Sector

Private Sector

Meaning

 

The public sector is a part of the economy comprising various levels of government-controlled and government 

enterprises. It excludes private businesses, households and voluntary organisations.

Private industry

is the segment of the economy operated by private individuals and

businesses to make money and is not controlled by the government.

Basic objective

To serve the country's citizens.

Making Profit

Raises money from

Public revenue such as penalties, taxes, duties, etc.

By taking loans or issuing shares/debentures.

Areas

Education, transport, police, manufacturing, electricity, agriculture, banking, insurance, army, mining, health, telecommunication, etc.

Mining, transport, education, finance, Information Technology, telecommunication, construction, pharmaceuticals, manufacturing, banking, etc.

Benefits of working

Job security, allowances, perquisites, retirement benefits, etc.

Competitive environment, good salary package, incentives etc.

Job Stability

Yes

No

Basis of Promotion

Seniority

Merit

The public sector and private sectors provide services to the general public, serving different purposes. The public sector provides services to the general public, while the private sector provides services to corporations and individuals.

Both sectors create jobs and services for the community. However, there are important differences between these two sectors. Here are a few of the main differences. To understand these differences, you should first understand the definition of each.

  • The government runs the public sector, whereas private companies and individuals control the private sector. 
  • The government owns public sector organisations, but the companies run by private owners enjoy less government control. 
  • While private sector companies enjoy less government interference, public sector employees enjoy job security and benefits than private-sector employees do not. 
  • Public sector jobs are generally more lucrative, while private-sector employees may not be as happy with their jobs.
  • The private sector has a much wider range of industries, while employees in the public sector work for public agencies and government departments. 
  • Public sector employees' salaries come from tax money, so they are often paid more slowly than employees in the private sector. On the other hand, private sector employees are paid from the profits of private companies. 
  • Employees in the private sector do not have retirement benefits, and taxpayers do not subsidise them. It's the reverse for the employees of the public sector.

Conclusion 

While they are competitive, public sector salaries can be competitive too. They generally do not compete with bonuses or the long-term rewards of employee share plans.

However, working in the public sector could be the best place if the balance between work and life is essential to you. People working in the private sector tend to work with the expectation of working longer hours. Therefore, save your time as time is gold. Also, companies' all debit and credit transactions online can be easily accessible through platforms like Khatabook.
Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: Are the banks involved in India's private sector and public sectors?

Ans:

Some are a part of the private sector if we talk about banks. For example, banks like Bank of India, Bank of Baroda, State Bank of India and Indian Bank are owned by the government. However, banks such as HDFC Bank, Axis Bank, Yes Bank, ICICI Bank and Kotak Mahindra Bank are operated by the private sector.

Q: What are the public sector and private sector with examples?

Ans:

If we talk about a simple example of the public sector, it includes sewers, public transit, infrastructure, healthcare, services, goods, etc. The public sector example consists of the judiciary, executive and legislative.

Q: What is the public sector vs private sector comparison?

Ans:

A group of individuals who own enterprises are private sector enterprises. The public sector enterprises mean the government operates them. Thus, private sectors mostly concentrate on making money, while public enterprises are the services that provide benefits to the public of a state/nation.

Q: What is the distinction between the public sector and the private sector?

Ans:

If the government owns, controls, or manages an organisation properly, it means it's a public sector. On the other hand, individuals who manage, operate, control and own any property, organisation, etc., are part of the private sector.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.