Privatisation – VI

Risks of Privatisation

According to critics the policy of privatization suffers from the following drawbacks

1] No social justice

Since private sector is profit-oriented it cannot ensure social justice.

2] Poor performance

Many private sector units in India are performing poorly, this may happen in case of public sector after privatization.

3] Concentration of wealth and economic power

Privatisation will lead to concentration of wealth and economic power in the hands of a few industrialists.

4] Increase in unemployment

The private sector is free to limit its recruitment of labour, unlike the public sector which has social responsibilities of creating employment. The private sectors would retrench labour.

5] Exploitation of consumers

Profit motive of private sector may lead to sub-standard products

6] Not fulfill national goals

The private sectors aim is to make profit and not removal of poverty, expansion of employment opportunities etc

7] No interest in long term projects

Private sector is interested in immediate profits and return. Therefore they would not come forward to make investment in infrastructure sector.  This will slow down the rate of economic development.

8] Need for government protection

The economic history of India since independence shows that private sector in India developed due to protection policy of the government. In the new policy of privatization, liberalization and globalization it is doubtful that the private sector would survive in absence of protection.

9] Competition from multi-nationals

The size of private sector units is small. Therefore it would be difficult for such companies to withstand competition created by multi-national companies.

10] No guarantee of performance improvement

According to critics, only change in the ownership does not give guarantee of performance improvement because it depends upon man power, technology, quality of goods and services offered. For this modernization and capital is required and there is no guarantee that private sector can do this.


Even though there are certain drawbacks of privatization, it cannot be suspended or avoided. The process of privatization in different sectors showed that availability and quality of services in private sector has improved after privatization.


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