Public Sector vs Private Sector

Publication Date :

09 Sep, 2019

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Table Of Contents

Difference Between Public and Private Sector

Private sector banks can be defined as banking institutions where the private equity holders hold the majority of the shares. In contrast, public sector banks (also called government) can be defined as banking institutions where the government owns most of the stake.

Difference Between Public and Private Sector

What is the Public Sector?

Public Sector encompasses the companies, enterprises, or businesses wherein the Government is the owner of the business by way of a majority shareholding in the business. These businesses are controlled, managed, and operated by the Government.

Companies owned, controlled, managed, and operated by Government/Government Bodies come under the public sector.

What is a Private Sector?

Private Sector includes those companies, enterprises, or businesses that are owned by Private Individuals or Private Companies. The companies in the Private Sector are controlled, managed and operated by Private Individuals/Private Entities.

Companies owned, controlled, managed, and operated by Private Companies/Private Individuals come under the private sector.

Companies in Public Sector and Private Sector in the Indian Context

Companies such as National Thermal Power Corporation, Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited, State Bank of India, National Highway Authority Limited are an example of public sector companies operating in power, Oil & Gas, Banking, Roads sectors in India.

There are numerous examples of companies operating in the private sector in India. Reliance Industries Limited, HDFC Limited, HDFC Bank, ICICI Bank are a few examples of private sector companies in an Indian context.

Public Sector vs Private Sector Infographics

Here we provide you with the top 11 differences between Public Sector vs Private Sector.

Public Sector vs Private Sector – Key Differences

The key differences between the Public Sector vs Private Sector are as follows –

Public sector companies serve the purpose of providing basic public services to larger people, whereas private sector companies are entirely profit-driven.
The government prefers retaining ownership of companies involved in utility services such as water, electricity, roads, agriculture, and also for industries sensitive to national security. Private sector companies have a large gamut of industries to operate with a growing trend of privatization.
Both public vs private sector companies can be listed on stock exchanges, and their shares can be publically traded.
Public Sector companies are prone to more Government interferences for multiple reasons, including political reasons, than their public sector counterparts
The government has control over the pricing of the products in public sector entities which is not the case with private companies.
Public sector companies are relatively better placed than private-sector counterparts in mobilizing funds from the market because of Government backing
Public sector entities may be asked by the Government to fund the Government budget deficit by way of declaring the dividend which is not the case of private sector entities.

Public Sector vs Private Sector Head to Head Differences

Let’s now look at the head-to-head difference between Public Sector vs Private Sector.

Basis	Public Sector	Private Sector
Definition	Public Sector refers to the part of the Country’s overall economy which is controlled by the Government or various Government bodies.	The private Sector refers to the part of the Country’s overall economy which is controlled by Individuals or Private Companies.
Ownership	Public sector companies are owned and managed by Government/Ministries/State Govt./Govt. Bodies	Private sector companies are owned and managed by Private Individuals and Private Companies.
Primary Purpose	Generally, Public Sector entities are driven by the purpose of providing the basic public services to the common public at a reasonable cost in their respective industries by being also self-sustainable and profitable. However, profitability is not the primary motive.	The purpose of Companies in the Private Sector is profit-making by operating within the rules and compliances of the respective country.
Industry Focus	Public sector companies mostly operate in industries such as Water, Electricity, Education, Oil & Gas, Mining, Defense, Banking, Insurance, Agriculture, etc.	Private Sector companies generally operate in multiple industries such as Technology, Banking, Financial Services, Manufacturing, Pharmaceuticals, Real Estate, Constructions, etc.
Financial Support from Government	Companies in the Public Sector get all possible financial support from the Government even in adverse circumstances wherein the financial health of the companies is not good.	Very little or no financial support from the Government unless a private entity is too big and systemically important for the Country.
Listing in Stock Markets	Entities in Public Sectors are publically traded on exchanges.	Entities in Private Sectors are publically traded on exchanges.
Profitability	Companies in the Public Sector are relatively less profitable because of their primary purpose of not being profitability driven.	Companies in the Private Sector are relatively more profitable than their public sector counterparts in the same industry.
Government Interference	Since Public Sector companies are owned by the Government, therefore they are subject to the uncertainties related to unfavorable Government decisions and larger Government interference.	Private Sector entities are relatively less exposed to Government interference.
Ease of Doing Business	Public Sector companies find it relatively easy to operate in a country because of its proximity to the Government	Private Sector companies find it relatively difficult to operate and manage the regulatory issues and compliance in a country in comparison to Public Sector companies
Resource Mobilisation (Funding)	Better placed to raise funds from the market because of backup by Government irrespective of the company’s financial health.	It depends upon the financial strength of the private sector entity—stronger the financials, better capacity to mobilize funds from the market.
Work Culture for Employees	Relatively relaxed work culture with higher job security. However, pay and perks may not be that attractive in comparison to private sector companies.	Competitive work culture with performance-based career growth and better pay than public sector companies.

Conclusion

The public sector vs private sector is differentiated by the nature of the ownership and their purpose of existence. The businesses operating in both the public and private sectors are critical to the economy of any country and co-exist in the economy. There are certain industries wherein it makes sense for the Government to take ownership and manage the businesses in that industry. Industries like defense wherein many things are sensitive from the national security point of view, are owned and managed by the Government. The private sector makes up a large part of the overall economy of any country, and of late, they have been participating in almost all businesses/industries at multiple levels of the value chain.