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Private And Public Investment

Another important classification of investment may be into private investment and the public investment.

The private investment refers to the expenditure incurred by the private entrepreneurs on the purchase of capital goods like plant machinery of construction of souses, factories, offices, shops, etc., or merely for inventory building. A large part of the total investment in a mixed economy, including India is uncounted for by the State. This investment takes place in the public sector of the economy and is managed by such public authorities such as the Central Government, State Governments, Local Authorities (Like the Delhi Development Authority) and public Corporations (like Bharat Heavy Electricals Ltd.)etc.

The motivations for investment in the public and private sector tend be different.

In the private sector, the firms aim to maximize their profits. hence, the expected profitability is the main motive for investment. Private entrepreneurs will invest only if they expect a satisfactory return on a particular project.

In the public sector, on the other hand, profit maximization may not be the only basis for investment; investment decisions may be influenced by the political and social factors. In our country, the government has invested in such projects as roads, dams schools, colleges, hospitals, etc. which provide services for which no prices are changed. It is not possible to compare revenue with investment costs of these projects. other public sector undertakings sell their products at heavily subsidized rates, e.g., the transport services provided by the Delhi Transport Corporation. Still others are advised just to break even, i.e., to sell their products at no-profit-no-loss basis, e.g., the houses constructed and sold by the Delhi Development Authority and other urban trusts in other big cities. In all these industries, these are not the profits considerations which weigh high with the public authorities rather the decisions are influenced by the social welfare considerations.

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