With the Union Budget only a couple of days away, it is important to trace the evolution of public-sector enterprises (PSEs) over the last decade. With the collapse of economic planning, worldwide, PSEs have been in a process of transformation. This has been visible across countries such as China and, most importantly, India in the last decade.
Globally, reforms in PSEs were triggered by the massive influence exerted by the public sector on the economy, requiring better efficiency and delivery of services. Among the many reforms over the years, the listing of enterprises and technology upgrades are prominent; adopting corporate governance standards and taking the lead in low-carbon transitions are more recent developments. As per the OECD, in 2023, the public sector owned over 25 per cent of 2,037 listed companies worldwide, representing 11.6 per cent of total market capitalisation.
The term PSE has wide connotations in India and includes both Central and state PSEs. For our purpose, we will primarily concentrate on Central PSEs (CPSEs).
In the Indian context, the 2020 New PSE Policy for Atmanirbhar Bharat streamlines PSEs by classifying sectors as strategic or non-strategic. In the non-strategic sectors, the government has minimised presence, while in the strategic sectors (defence, energy, space, etc.) it will maintain a bare minimum presence with one to four PSEs, making room for private-sector participation.
During the last decade, CPSEs in India have shown a remarkable turnaround, from policy paralysis and stagnant growth to becoming significant drivers of financial value, higher profitability, and capital expenditure. The listed CPSEs have outpaced broader market indices and the impact of reforms is clearly visible in their finances.
The number of profit-making CPSEs has increased from 157 in FY15 to 227 in FY25, while the number of loss-making CPSEs declined from 77 to 63 during the same period. Consequently, the net profit of profit-making CPSEs stood at Rs 3.09 lakh crore in FY25 as compared to Rs 1.30 lakh crore in FY15, an increase of around 2.4 times. The total paid-up capital of all CPSEs was Rs 6.87 lakh crore as on March 31, 2025, as against Rs 2.13 lakh crore as on March 31, 2015. The net worth of all CPSEs swelled from Rs 9.85 lakh crore in FY15 to Rs 22.33 lakh crore as on March 31, 2025.
The contribution of all CPSEs to the central exchequer stood at Rs 4.94 lakh crore in FY25 as against Rs 2.00 lakh crore in FY15. Additionally, the total market capitalisation of 66 CPSEs traded on stock exchanges of India was Rs 38.57 lakh crore as on March 31, 2025 — three times larger than the capitalisation as on March 31, 2015.
Gross capital formation by non-financial CPSEs has grown by 11.9 per cent and has been a mainstay of investment demand in core sectors. It has been a net saving sector, accounting for 10 per cent of national savings, and has financed gross capital formation internally with minimal exposure to the rest of the world.
Among the financial CPSEs, banks have seen phenomenal turnarounds after the twin balance sheet crisis. Following the amalgamation exercise, the financial performance of PSU banks has improved, and the pace of technology adoption has increased. The profitability of banks has been enhanced significantly with net profits rising from Rs 80,913 crore in FY14 to Rs 4 lakh crore in FY25 (PSBs’ profit increased to Rs 1.78 lakh crore in FY25 from Rs 37,019 crore in FY14). The return on assets increased to 1.37 per cent in FY25 from -0.22 per cent in FY18, while return on equity jumped to 14.09 per cent from -2.74 per cent during the same period.
Among the central PSEs, around 10 CPSEs are listed in the Fortune India 500 as per the latest rankings in 2025-26.
Another remarkable aspect of the PSE reforms has been their growing contribution to exports. CPSEs have achieved notable success in defence, engineering, and commodities exports with defence exports surging to a record high of Rs 23,622 crore in 2024-25.
In terms of the green transition, the contribution of CPSEs has been notable. Let’s take the example of Indian Railways, although not a PSE as per definition. With the successful trial of India’s first hydrogen-powered coach at the Integral Coach Factory in July 2025, Indian Railways may achieve rapid decarbonisation in coming years. In the last 10 years, Railways has electrified close to 45,000 km of its broad-gauge network, reducing diesel dependence and cutting emissions sharply. The transition is complemented by large-scale renewable integration with 553 MW of solar, 103 MW of wind and 100 MW of hybrid capacity.
Following the government decision to allow CPSEs to acquire foreign assets, Indian oil PSUs have established a significant presence globally, with a total of 45 assets spread across 21 countries. They have a cumulative investment of about $40.6 billion.
In the coming decades, CPSEs will continue to face headwinds and challenges as technology evolves and market dynamics change. Growing use of technology will put the focus on the need for skill upgrades to achieve the desired agility. R&D spending will also be an area that may need attention.
Furthermore, the positive reform process that has achieved the transformation of CPSEs should move to the state level in the coming years. Greater transparency in PSE operations at the state level can be a catalyst for regional development.
The writer is member, 16th FC; member, PMEAC; and group chief economic advisor, State Bank of India. Views are personal
