Question

Which concept is related to disposal of equity of public sector units in the market for covering the

fiscal deficit of the central government?

a) Privatisation

b) Denationalisation​

Answer 1

Answer: the correct answer is disinvestment

Explanation:

Divestment is an action by an organization or government that sells or liquidates assets or a subsidiary. Absent the sale of an asset, disinvestment also refers to a reduction in capital expenditure (CapEx), which can facilitate the reallocation of resources to more productive areas within an organization or government-funded project.

Whether disinvestment results in divestment or reduced funding, the primary objective is to maximize return on investment (ROI) related to capital goods, labor, and infrastructure.

• Disinvestment occurs when governments or organizations sell or liquidate assets or subsidiaries.
• Divestments can take the form of divestitures or reductions in capital expenditures (CapEx).
• Divestment is done for various reasons such as strategic, political or environmental.

In most cases, divestments are primarily motivated by optimizing resources to ensure maximum returns. To achieve this objective, divestment may take the form of a sale, spin-off, or reduction in capital expenditure. Investments may also be reduced for political or legal reasons.

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