Privatisation

Defination: Privatisation refes to any process that reduces the participation of the state/public sector in econoimc activities of a country.Private sector has been allowed to play a major role in different types of economic activities. Aspects: (a) (b) (c) (d)

Transfer of the government ownership of productive assets to the private sector.It implies denationalisation. Disinvestment:-sale of a part of equity of public sector enterprise to private capital. Entry of private sector industries into the exclusively reserved industries for the public sector. Limiting the scope of public sector and on further expansion of the exisitng public sector.

Argument for Privatisation:•

• • •

Poor performance of public enterprise:- In view of poor performance of public sector undertakings,public sectro has become a burden on national economy. Rising budgetary deficits:- budgetary deficits are increasing which further contributes to rising prices. Growing non-developmenatal Expenditure:- non developmental expenditure weakens our financing. High capital-output ratio:- high capital investment but poor output has lead to demand of privatisation.

Policies: •

•

Contracrion of public sector:- list of 18 is reduced to 7 & only 3(atomic mineral,railway n atomic energy) are reserved for public sector. Disinvestment:- shares of public sector undrtakings are being sold among the workers and public for greater praticipation of private individuals.

•

More institutuional credits:- more institutional credit to private sector enterprises from national financial institutions.according to the New Industrial Policy,these financial institutions will not insist for conversion of loans into share capital.

Argument against privatisation: •

• • •

Unbalanced growth:- Privatisation is no gurantee for social betterment.It results in unbalanced growth of the economy.Public sector is indispensable for the development of all sectors/sections of the economy. Adverse effects on standard of living:- Privatisation has nothing to do with standard of living of the masses. Less scope for the development of infrastructure:- economic and social infrastructure remains untouched. Growth of state monopoly:- privateisation tampers public sector and prohibits any development .