When India achieved independence, the national consensus was in favour of rapid industrialisation. The first Industrial Policy Resolution announced in 1948 laid down broad contours of the strategy for industrial development. Subsequently, the Planning Commission was formed and the Industrial Act was enacted with the objective of empowering the government to take necessary steps to regulate industrial development.
Prime Minister Jawaharlal Nehru promoted the policy of mixed economy. The second Five-Year Plan (1956–61) and the Industrial Policy Resolution of 1956 emphasised on the development of public sector enterprises.
Accordingly, to overcome red tape and indifference in the functioning of government departments and to serve the citizen better, several public sector undertakings (PSUs) were established across the country. These included State Road Transport Corporations, Bharat Petroleum, Oil and Natural Gas, Indian Oil, BHEL, BEL, National Buildings Construction, NMDC, Oil India Limited, Central Warehousing, HMT, ITDC, Hindustan Cables and Praga Tools. As some of these were not functioning on expected lines and were also incurring losses, public sector reforms were introduced leading to the closure of a sizable number of PSUs.
Thatcherism, named after former British Prime Minister Margaret Thatcher, was critical of the public sector for failing to provide its clients and users a more courteous, efficient and higher quality service. Prime Minister Narendra Modi is often referred to as Indian Thatcher.
According to Thatcher, staff employed in the public sector allegedly failed to appreciate that the people they served, were precisely those whose taxes provided a major source of revenue for their units, and, of course, their salaries. Hence, the public sector was often synonymous with shabby, second-rate service.
Thatcherism argued that those employed in public sector services tended to prioritise their own interests over the interests of the public that relied on such services. The alleged attitude of many public sector staff was that those who relied upon such services should simply ’accept what they are given’ and be grateful.
The other argument advanced by Thatcher about the poor quality of service provided by the public sector was that such services are usually monopolies, and so did not face competition. Consequently, professionals in the public sector allegedly assumed that service users could not go elsewhere if they were dissatisfied with the quality or speed of service they received. According to Thatcher, lack of competition compounded another major problem — the power of those trade unions whose members worked in such services.