Question

Define disadvantages?give reasons for the privatization of public sectors in India.​

Answer 1

Answer:

Problems of the Public Sector Enterprises in India :

• Natural monopoly. A natural monopoly occurs when the most efficient number of firms in an industry is one
• Public interest
• Government loses out on potential dividends
• Problem of regulating private monopolies
• Fragmentation of industries
• Short-termism of firms

Privatization :

Governments take privatization stance to reduce its burden in terms of underutilization of resources, over and redundant employment, fiscal burden, financial crises, heavy losses and subsidies in order to improve and strengthen competition, public finances, funding to infrastructure, and quality and quantity of services in terms of management. Study used a comprehensive approach to explore all the reasons of privatization and categorising them based on past literature. Categories formulated are accounting reasons, economic reasons, political reasons, social reasons, motivation from public vs. private ownership differences and incentives of post privatization performance. Moreover the role of government in post privatization arena has prime importance without which the desired objectives can't be achieved. Based on the study it can be inferred that it is not necessary that a country opt privatization based on all the reasons but surely pick one or more from them. Post privatization performance of the previously SOEs is the prime motive behind it. However economic reasons also take part in privatization with same magnitude.

Explanation:

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Answer 2

Answer:

DISADVANTAGE

something that puts one in an unfavorable position or condition

OR

the state or an instance of being in an unfavorable circumstance or condition

Arguments in favour of privatisation:

1. Greater flexibility in making decisions: Sometimes PSUs suffer losses just due to inadequate autonomy in the 'decision making power' of the management. If the PSUs are privatised, then the production and investment decisions of the management would be free from any government intervention, and they would be purely guided by profit motive.

2. Improvement in Managerial Efficiency: Privatisation is a means of improvement in managerial efficiency because the private sector is almost free from political interference.

When many areas of industrial production are opened up for the private sector enterprises, then their investment in the industrial sector is expected to increase to a large extent. Higher investment would mean creation of greater employment and income opportunities within the economy.