Public sector should improve its efficiency and productivity which would enable the government to meet its social obligations, Prime Minister's Economic Advisory Council Chairman C Rangarajan said on Saturday.
He said the government does recognise the significance of the public sector as "it is only an efficient public enterprise system that can enable the government to meet its social obligations."
"However, if the public sector is truly to play its role, it needs to improve its efficiency and productivity and generate the necessary surpluses as were originally envisaged," he added.
The former RBI governor said: "The new economic policy of India has not necessarily diminished the role of the state, it has only redefined it. As it has been said...More market does not mean less government but only different government."
Rangarajan, who was addressing a function to celebrate two years of centralisation of Allahabad University, said the economic reforms which gathered momentum after 1991, followed "eroding macro-economic balances in the economy towards the end of the 1980s."
In this scenario, he said, the new economic policy was chalked out to "improve the efficiency of the system" by "creating a more competitive environment in the economy."
To achieve this end, "the private sector is being given a larger space to operate in areas earlier reserved exclusively for the public sector," he said.