Question

What do you mean by ‘disinvestment policy’? Analyse the impact of this policy in our
nation

Answer 1

Answer:

Explanation:

Disinvestment is when governments or organizations sell or liquidate assets or subsidiaries. Disinvestments can take the form of divestment or a reduction of capital expenditures (CapEx). Disinvestment is carried out for a variety of reasons, such as strategic, political, or environmental.

Answer 2

Answer:

Explanation:

The main objective of disinvestment is to put national resources and assets to optimal use and in particular to unleash the productive potential inherent in our public sector enterprises. The policy of disinvestment aims at modernization of PSEs, creation of new assets, generation of employment and retiring of public debt.

To obtain release of the large amount of public resources locked up in non-strategic Public sector units for re-employment in areas that are much higher on the social priority e.g. health, family, welfare etc. and to reduce the public debt that is assuming threatening proportions.

2. Privatization would help stemming further outflows of the scarce public resources of sustaining the unviable non-strategic public sector unit.

3. Privatisation would facilitate transferring the commercial risk to which the tax payer’s money locked up in the public sector is exposed to the private sector wherever the private sector is willing to step in.

4. Privatisation would release tangible and intangible resources such as large manpower locked up in managing PSU’s and release them for deployment in high priority social sector.

5. Disinvestment would expose privatized companies to market disciplines and help them become self reliant.

6. Disinvestment would result in wider distribution of wealth by offering shares of privatized companies to small investors and employees.

7. Disinvestment would have a beneficial effect on the capital market. The increase in floating stock would give the market more depth and liquidity, give investors early exit options, help establish more accurate benchmarks for valuation and raising of funds by privatized companies for their projects and expansion.

8. Opening up the public sector to private investment will increase economic activity and have an overall beneficial effect on economy, employment and tax revenues in the medium to long term.

Bring relief to consumers by way of more choices and better quality of products and services, e.g. Telecom sector.

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