Disinvestment
Disinvestment
1) What Does Disinvestment Mean?
Ans) The action of an organization or government selling or liquidating an asset or subsidiary. Also known as "divestiture".
OR
A reduction in capital expenditure, or the decision of a company not to replenish depleted capital goods.
2) Why disinvestment in India?
In India for almost four decades the country was pursuing a path of development in which public sector was expected to be the engine of growth. However, the public sector had overgrown itself and their shortcomings started manifesting in the shape of low capacity utilization and low efficiency due to over manning and poor work ethics, over capitalization due to substantial time and cost overruns, inability to innovate, take quick and timely decisions, large interference in decision making process etc.
The Government started to deregulate the areas of its operation and subsequently, the disinvestment in Public Sector Enterprises (PSEs) was announced. The process of deregulation was aimed at enlarging competition and allowing new firms to enter the markets. The market was thus opened up to domestic entrepreneurs / industrialists and norms for entry of foreign capital were liberalized.
Due to the current revenue expenditure on items such as interest payments, wages and salaries of Government employees and subsidies, the Government is left with hardly any surplus for capital expenditure on social and physical infrastructure. While the Government would like to spend on basic education, primary health and family welfare, large amount of resources are blocked in several non-strategic sectors such as hotels, trading companies, consultancy companies, textile companies, chemical and pharmaceuticals companies, consumer goods companies etc. Additionally, the continued existence of the PSEs is forcing the Government to commit further resources for the sustenance of many non-viable PSEs. The Government continues to expose the taxpayers' money to risk,
1) What Does Disinvestment Mean?
Ans) The action of an organization or government selling or liquidating an asset or subsidiary. Also known as "divestiture".
OR
A reduction in capital expenditure, or the decision of a company not to replenish depleted capital goods.
2) Why disinvestment in India?
In India for almost four decades the country was pursuing a path of development in which public sector was expected to be the engine of growth. However, the public sector had overgrown itself and their shortcomings started manifesting in the shape of low capacity utilization and low efficiency due to over manning and poor work ethics, over capitalization due to substantial time and cost overruns, inability to innovate, take quick and timely decisions, large interference in decision making process etc.
The Government started to deregulate the areas of its operation and subsequently, the disinvestment in Public Sector Enterprises (PSEs) was announced. The process of deregulation was aimed at enlarging competition and allowing new firms to enter the markets. The market was thus opened up to domestic entrepreneurs / industrialists and norms for entry of foreign capital were liberalized.
Due to the current revenue expenditure on items such as interest payments, wages and salaries of Government employees and subsidies, the Government is left with hardly any surplus for capital expenditure on social and physical infrastructure. While the Government would like to spend on basic education, primary health and family welfare, large amount of resources are blocked in several non-strategic sectors such as hotels, trading companies, consultancy companies, textile companies, chemical and pharmaceuticals companies, consumer goods companies etc. Additionally, the continued existence of the PSEs is forcing the Government to commit further resources for the sustenance of many non-viable PSEs. The Government continues to expose the taxpayers' money to risk,