Economics: Production: Various Types of Producers, Indigenous and Foreign Production Units (For CBSE, ICSE, IAS, NET, NRA 2022)

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Identifying Various Types of Producers in the Economy

On the basis of ownership, the production units can be broadly classified into the following.

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Indigenous Production Units

The production units located in a country and owned by the residents of the country are called indigenous production units. the indigenous production units can be classified into:

Private Production Units

Shops, offices, factories owned by private persons or group of families are called private production units. They produce goods and services for sale in the market with the aim of earning profit. On the basis of number of owners, private sector production units can be classified into the following categories.

  • Sole proprietorship: Such production units are owned by a single person.
  • Partnership: Such production units are owned by two or more persons. Maximum number is 20. Owners of such production units are called partners of the company.
  • Company or Corporations: It is a production unit owned by a large number of persons. The sum invested in the company is divided into shares. The buyers of these shares are called shareholders. They are all the owners of the company. In private company the minimum number of shareholders is two and the maximum number is 50. But in public company minimum number is seven but there is no maximum limit.
  • Cooperative society: It is also a production unit managed by a number of persons. It is a voluntary association of persons for mutual benefit. Its aims are achieved through self-help and collective efforts. In some respects, it is similar to the company. Its owners are also called shareholders. It works according to cooperative societies Act 1912. The minimum number of shareholders is ten but there is no upper limit.
  • Private Non-profit Organizations: There are private production units which are run by institutions, such as trusts, societies etc. like charitable hospital, charitable school, welfare societies etc. Such production units provide services mainly with the aim of serving the member of society as a whole without any aim to earn profit.

Government Production Units

  • The companies and organizations owned by the government or whose functioning is directly governed by the government are called Government Production Units. Some of the organizations providing these services are run by the Departments and Ministries of the government. They are called Departmental Enterprises. Ex. Doordarshan.
  • There is another type of government production units which are supported and funded by the government but function independently. These units are non-departmental enterprises and called Public Sector Undertakings. Ex. Hindustan Machine Tools (HMT) .

Foreign Production Units

A foreign production unit is located in the country but is owned by foreigners or non-residents of the country. In such production units the contribution of foreigners must be more than 50 % of total capital. The foreign production units are further classified into:


These are firms which have their main office in one country but have their business activities spread in many countries. These are called Multinational Corporations (MNC) because they operate in more than one country other than the country of their origin. Ex. Coca-Cola.


These are production units in which foreigners and domestic entrepreneurs participate jointly. Such production units are partly indigenous and partly foreign. These are treated as foreign production units in terms of ownership if more than 50 % of its total capital is contributed by the foreigners or non-residents. Ex. Maruti- Suzuki Limited.

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