Difference Between Public and Private Sector
At some point, we all must have heard the terms Public and Private sectors. But only a few of us know the difference between public and private sector. If you are unaware of the difference between public and private sector, don’t worry. In this article, we will discuss it in detail.
The main difference between public and private sector is that the government owns, controls, and manages public sectors. In contrast, private sectors are owned, controlled, and managed by individuals, groups, or business entities. Employment stability is generally higher in the public sector, while the private sector may offer higher salaries and more dynamic work environments.
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Difference Between Public and Private Sector
For a better understanding, let’s cover the difference between public and private sectors in a tabular format. Here’s the table:
| Benchmark | Public Sector | Private Sector |
|---|---|---|
| Definition | A business that is owned, controlled and managed by the government. | Individuals, groups, or business entities own, control, and manage a business. |
| Ownership | Government bodies, such as Central government, State government, or Local government. | Individuals, groups, or business entities, and there is no interference from any government bodies. |
| Objective | To serve the general public. | To earn profits. |
| Income source | Tax collections, tariff and non tariff barriers, exercise duties, bonds, treasury bills, etc. | Owner, loans, debentures, issuing shares, etc. |
| Employment benefits | The jobs in this sector provide high job security, allowances, and retirement benefits. | The jobs in this sector provide higher salary packages, better chances of promotion, and more significant incentives. |
| Stability | Provides better stability as there is minimal chance of getting sacked due to non-performance. | Provides less stability as there is a high chance of getting sacked due to non-performance. |
| Promotion depends on the | Seniority of the employee. | Job performance and merit of the employee. |
| Areas covered | Armed forces, electricity, agriculture, etc. | IT companies, telecommunication, construction, etc. |
| Examples | Oil and Natural Gas Corporation (ONGC), Coal India Limited (CIL), etc. | Wipro, Reliance, etc. |
What is a Public Sector?
Public sector definition: Public sectors are those sectors that are owned, controlled and managed by the government.
In layman’s terms, public sectors are those sectors or organizations owned and operated by government bodies rather than private individuals or a group. These sectors or organizations aim to provide services to the country’s people much cheaper than the private sector.
These sectors earn money through various activities, such as collecting taxes, imposing fines on offenders, bonds, treasury bills, etc. In short, their main goal is to ensure the welfare of every citizen within a country. Some of the most common examples of the public sector are government schools, hospitals, and police departments.
Note: The public sector may comprise government entities and private individuals or groups. But, the majority share of capital will always be owned by the government entity. Such sectors are commonly known as Joint sectors. An example of a joint sector is Oil India Limited (OIL).
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What is a Private Sector?
Private sector definition: Public sectors are those sectors that are owned, controlled, and managed by private individuals or a group.
In layman’s terms, private sectors are those sectors or organizations owned and operated by private individuals or groups rather than the government. These sectors or organizations aim to earn profits by selling their organization’s products and services.
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These sectors earn money through various activities, such as issuing shares, debentures, etc. In short, their main goal is to earn maximum profit while following government norms and regulations. Some of the most common examples of the public sector are IT companies, courier services, and telecommunication industries.
Key Differences Between Public and Private Sectors
Here are the key differences between public and private sector:
- Jobs in the public sector are more stable than those in the private sector.
- The primary source of income for the private sector is issuing shares, debentures, etc. But, the primary source of income for the public sector is collecting taxes, treasury bills, etc.
- Government bodies own, manage, and control the public sector. Private groups, individuals, and individuals own, manage, and control private sectors.
- The main goal of the private sector is to earn maximum providing by selling their services and products. On the other hand, the public sector’s primary goal is to ensure every citizen’s welfare within a country by providing public services at a much cheaper rate than the private sector.
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Conclusion
The public and private sectors are two distinct entities that play essential roles in our economy and society. Individuals or groups with the primary goal of making a profit own and operates the private sector. On the other hand, the government owns and operates the public sector to provide public services and goods.
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FAQs
How is the source of funding different in the public and private sectors?
The public sector is primarily funded by taxpayer money and government allocations, whereas the private sector relies on private investments, revenues, and profits.
How is decision-making different in the public and private sectors?
Decision-making in the public sector involves a more bureaucratic and political process, often influenced by government policies and regulations. In the private sector, decision-making is typically driven by market forces and the pursuit of profit.
How are employment practices different in the public and private sectors?
The public sector often follows stricter regulations and may provide employees with more job security, benefits, and pensions. The private sector offers flexibility and relies on market conditions to determine employment practices.
Are public sector organizations subject to competition?
Public sector organizations may face limited competition or monopolize certain areas, especially in essential services such as healthcare, education, or utilities. However, some public sector entities do face competition from private enterprises.
How are salaries and compensation different in the public and private sectors?
Market forces typically determine private sector salaries and compensation and can be more variable and performance-based. In the public sector, salaries are often structured according to predetermined scales and may be influenced by government policies.
Can employees move between the public and private sectors?
Yes, employees can transition between the public and private sectors, depending on their skills, qualifications, and job opportunities. However, there may be differences in work culture, job security, and compensation.
What is the ownership structure of banks in India? Do they belong to the Private or Public sector?
In India, banks operate in both the public and private sectors. Public sector banks, such as State Bank of India and Bank of Baroda, are government-owned, whereas private sector banks, like ICICI and HDFC, are privately owned.
What distinguishes a public limited company from a private limited company?
The key distinction lies in their capital-raising methods. A public limited company is listed on the stock exchange and can raise capital from the general public by issuing shares, debentures, and bonds. In contrast, a private limited company is not traded publicly, and its shares are owned and controlled by private investors and entities.
What are the main areas of operation for the public sector?
The main areas of operation for the public sector include healthcare, education, public transportation, law enforcement, defence, and infrastructure development. These sectors focus on providing essential services and ensuring the welfare of the public, often prioritizing accessibility and affordability over profit.
How does the public sector ensure the affordability of services?
The public sector ensures the affordability of services by subsidizing costs through government funding and taxation. This enables essential services like healthcare and education to be provided to the public at lower or no cost.
Apart from this, public sector organizations often focus on universal access and social equity, aiming to meet the needs of all citizens regardless of their economic status. By prioritizing public welfare over profit, they can maintain lower prices for essential services.
How does funding differ between the public and private sectors?
Public sector funding primarily comes from government budgets, which are financed through taxes. This funding is intended to provide essential services to the public without profit motives. In contrast, the private sector relies on revenue generated from sales, investments, and private financing, focusing on profitability and shareholder value.
What is the significance of public sector organizations in a country?
Public sector organizations play a crucial role in a country by providing essential services and infrastructure that promote social welfare and economic stability. They focus on sectors like healthcare, education, and transportation, ensuring access to vital services for all citizens, particularly underprivileged communities. Besides this, public sector organizations help regulate markets, create job opportunities, and contribute to national development goals.
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