Privatisation – III

Privatisation in India

In the Industrial policy resolution of 1948 about 17 strategic and important industries were reserved for the public sector. From 1956 onwards government kept increasing the public sector hence the growth of public sector was fast. This was done to promote growth and development.

In the course of time many public sector units started facing a lot of problems such as political interference in the day to day management, this led to inefficiency, loss etc. It was a burden on the exchequer and the Indian economy started suffering from the demerits of government monopoly. Therefore privatization of these units became necessary.

Privatisation is a process wherein the government transfers the ownership or management and control in the public sector units to the private sector and allows them to set up more and more such industries which were previously reserved for the public sector. It is a process of dismantling and regulating public monopolies.

For the purpose of privatization, the government of India has adopted the path of disinvestment. This involves sale of public sector equity to private sector and to the public at large.

The New Economic Policy announced by the government of India in 1991 gave importance to the policy of privatization

Objectives of Privatisation in India

To improve performance of public sector enterprises.

To reduce budgetary deficit by reducing the burden of sick and non-viable public sector units by the policy of privatization and disinvestment.

To solve the problem of political interference in the functioning of public sector enterprises by privatization and by giving them autonomy.

To enable government to concentrate on social development, policies of poverty eradication, literacy programme and improve the quality of life of people.

To raise resources for implementation of economic planning

To overcome the problem of inefficiency, corruption, red tapism, and delay in public sector enterprises.

To fix the responsibility and management and efficiency on public sector units by giving them freedom of management and finance.

To make efficient use of funds collected through privatization and disinvestment for economic development, social upliftment and rehabilitation of workers affected due to policy of disinvestment.

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Posted in Indian Economy