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.

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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 privatizationPrivatizationPrivatization refers to transferring ownership, operation, and control of a government or public entity to a non-government or private enterprise.read more.Both public vs private sector companies can be listed on stock exchanges, and their shares can bePublicly Traded Companies, also called Publicly Listed Companies, are the Companies which list their shares on the public stock exchange allowing the trading of shares to the common public. It means that anybody can sell or buy these companies’ shares from the open market.read more publically tradedPublically TradedPublicly Traded Companies, also called Publicly Listed Companies, are the Companies which list their shares on the public stock exchange allowing the trading of shares to the common public. It means that anybody can sell or buy these companies’ shares from the open market.read morePublic Sector companies are prone to more Government interferences for multiple reasons, including political reasons, than their public sector counterpartsThe 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 backingPublic sector entities may be asked by the Government to fund the Government budget deficitBudget DeficitBudget Deficit is the shortage of revenue against the expenses. The budgetary deficit could be the sum of deficit from revenue and capital account. read more by way of declaring the dividendDeclaring The DividendDividend declared is that portion of profits earned that the company’s board of directors decides to pay off as dividends to the shareholders of such company in return to the investment done by the shareholders through the purchase of the company’s securities.read more 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.

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 chainValue ChainValue chain (VC) refers to the sequence of activities and processes a business undertakes to add value to its product or service at every stage from its inception to delivery.read more.

This has been a guide to the Public Sector vs Private Sector. Here we discuss the top difference between Public Sector and Private Sector along with infographics and comparison tables. You may also have a look at the following articles on Corporate Finance –

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