India’s public‑sector enterprises have been a political litmus test for successive governments. From Jawaharlal Nehru’s modest portfolio of 70 state‑run firms to Narendra Modi’s record‑high 84, the numbers tell a story of expansion rather than contraction. Yet the expansion has come at a steep cost: billions of rupees flow each year into loss‑making units, crowding out productive investment and burdening taxpayers. This article examines how the PSU count has risen, why reforms stall, the fiscal toll of these enterprises, and what the future might hold if the status quo persists.
Rising tally of state‑run enterprises
Since independence, the central government has used public‑sector undertakings (PSUs) to drive industrialisation, ensure strategic control, and provide employment. The table below tracks the official count of central PSUs at key moments in India’s economic history.
| Year | Number of central PSUs |
|---|---|
| 1950 | 45 |
| 1970 | 70 |
| 1990 | 78 |
| 2000 | 81 |
| 2010 | 82 |
| 2020 | 84 |
| 2024 | 84 |
Source: BusinessToday article.
Why the numbers keep climbing
Several factors explain the steady rise:
- Political incentives: Governments often create new PSUs to reward allies or signal commitment to self‑reliance.
- Strategic considerations: Sectors such as defence, energy and railways are deemed too vital to leave entirely to the private market.
- Legacy of disinvestment: While the 1990s saw a wave of privatization, many units were only partially divested, leaving the core structure intact.
These drivers have made it difficult to reverse the trend, even as fiscal pressures mount.
Fiscal impact of loss‑making PSUs
According to the Comptroller and Auditor General’s 2023 report, the cumulative loss of central PSUs in the 2022‑23 fiscal year exceeded ₹1.5 trillion. The burden is uneven:
- Heavy‑loss carriers such as Air India and Indian Oil consume a large share of the subsidy pool.
- Smaller entities, while individually modest, collectively add up to a significant drain.
These outlays reduce the government’s fiscal space, limiting its ability to fund social programmes or infrastructure projects. Moreover, the opportunity cost of capital tied up in underperforming firms is a hidden drag on growth.
Calls for reform and political resistance
Economists and industry bodies repeatedly urge a “strategic disinvestment” roadmap that would:
- Identify genuinely strategic assets for retention.
- Privatize non‑strategic units through transparent auctions.
- Introduce performance‑linked governance for the remaining PSUs.
However, opposition parties and trade unions often frame such moves as “selling national assets,” leading to legislative delays. The result is a policy stalemate where fiscal prudence clashes with electoral calculations.
Looking ahead: scenarios for the next decade
If the current trajectory continues, the fiscal leak from PSUs could rise to over ₹2 trillion annually by 2035, according to a projection by the Centre for Policy Research. Conversely, a decisive reform package could cut losses by up to 40 % within five years, freeing resources for health, education and green infrastructure.
Stakeholders agree that the window for meaningful change is narrowing, and the next election cycle may prove pivotal.
In sum, the growth in the number of public‑sector firms reflects deep‑seated political choices rather than economic necessity. The fiscal cost is substantial, and without bold reform, India risks squandering resources that could otherwise fuel its development agenda.
Image by: Storishh Media
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