India's Top PSUs 2021

16 Rising Influence of Financial Services Within the Public Sector The contribution of PSUs from the mining and quarrying sectors to the overall public sector GDP increased over the first four decades, peaking at 12% by FY89. This reflects the Government’s thrust of developing basic industries. This also becomes evident from the fact that iron & steel, coupled with machinery and equipment sectors accounted for as much as 53% of total capital assets in FY59. Furthermore, the 2nd Industrial Policy Resolution of 1956, which reserved 18 industrial sectors exclusively for PSUs, led to significant contribution of the manufacturing sector to public sector GDP at 13% in the early 90s. However, the contribution of themining andmanufacturing segments began declining following the liberalisation of the economy during the 1990s. In recent times, the share of the public sector frommining andmanufacturing segments to GDP has contracted to modest 5-6% levels in FY20. The financial services sector on the other hand, which had contributed to less than 10% of the public sector GDP till the mid-70s, witnessed a steady expansion in contribution thereafter. Having peaked at 16% in FY11, the sector’s share in public sector GDP stands at a sizeable 13% as in FY20. Contribution of key sectors to public sector GDP (%) 1 12 10 10 6 4 11 12 10 5 4 10 12 14 13 0 10 20 30 40 FY61 FY65 FY70 FY75 FY80 FY85 FY90 FY95 FY00 FY05 FY10 FY15 FY20 Mining &Quarrying Manufacturing Financial Services Share in Public Sector GDP (%) Public sector includes departmental and non-departmental PSUs as well as administrative units Source: MOSPI Despite Rise in Number of Profit-Making PSUs, Profitability has Eroded in Past Two Decades The number of profit-making units have increased from 90 in FY81 to 134 in FY98, and further to 171 in FY20. On the other hand, the number of loss-making units, which increased from 75 in FY81 to 110 in FY01, decreased to 84 in FY20. This points to relatively improved efficiencies among PSUs in general. Interestingly, while the number of profit-making PSUs has been rising, their profitability (at aggregate level) has been deteriorating since FY05. At the aggregate level, the return on capital employed as measured by net profit/capital employed improved substantially from a decline of 1% in FY81 to peak at 13% in FY05. The tremendous improvement in return ratios, especially in the 90s and early 2000s were partially owing to the greater autonomy provided to the PSUs as part of policy reform measures. Dun & Bradstreet