Topic: Investment models. Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
4.Discuss the advantages of disinvestment as a mode for mobilization of resources for the government with recent cases. (250 words)
Reference: The Hindu
Why this question:
Union Minister of Finance recently announced that the government plans to sell a part of its holding in Life Insurance Corporation (LIC) by way of an Initial Public Offering (IPO). Thus the question.
Key demand of the question:
The answer must discuss the advantages of disinvestment as a mode for mobilization of resources for the government with recent cases.
Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.
Structure of the answer:
Briefly explain the aspects of disinvestment in general for an economy.
Disinvestment is the action of an organization or government selling or liquidating an asset or subsidiary. Disinvestment also refers to capital expenditure reductions, which can facilitate the re-allocation of resources to more productive areas within an organization or government-funded project. It is also known as divestiture; it is the opposite of an investment and is usually done when that subsidiary asset or division is not performing up to expectations. Discuss the types of disinvestments. Explain the advantages while highlighting the concerns involved.
Conclude by reasserting the significance of such measures to the economy.