opic– Indian Economy – Issues
4)Examine why disinvestment is necessary? Analyze whether there is a need to relook at the policy of disinvestment?(250 words)
Why this question
Disinvestment, especially after the attempt at strategic sale of Air Asia, is in news often and quite important for mains.
Key demand of the question
The question is basically a static question, where the points mentioned in the article can be incorporated to embellish your answer. We need to examine the need of disinvestment, discuss the macro features of the policy of disinvestment and analyze in light of examples highlighted in the article, whether there is a need to have a relook at it.
Examine – When you are asked to examine, you have to probe deeper into the topic, get into details, and find out the causes or implications if any.
Analyze – When asked to analyze, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary.
Structure of the answer
Introduction – Highlight that the recent attempt at air India sale, and the hesitant approach in case of IDBI etc shows the reticence of government towards disinvestment.
- Mention the benefits of disinvestment
- role of the government versus the market was sought to be redefined
- loss-making public enterprises were sought to be revived
- Inability of the government to be present in all function and no necessity of it as well. etc
- discuss the policy of disinvestment
- Public Sector Undertakings are the wealth of the Nation and to ensure this wealth rests in the hands of the people, promote public ownership of CPSE
- While pursuing disinvestment through minority stake sale in listed CPSEs, the Government will retain majority shareholding, i.e. at least 51 per cent of the shareholding and management control of the Public Sector Undertakings
- Strategic disinvestment by way of sale of substantial portion of Government shareholding in identified CPSEs upto 50 per cent or more, alongwith transfer of management control
- Examine whether this has yielded results. Highlight that public sector is wary of government partnership, objectives of LPG to be met etc. Also discuss why there is a need to remain cautious with respect to disinvestment.
Conclusion – Discuss what should be the way forward.