A Note On Privatisation


In a mixed economy, public and private sectors operate side by side and adequate scope is given to both. In the private sector, the ownership and management of enterprises are with individuals. They are allowed to take all decisions and manage the business within the legal framework available. In many countries, private sector dominates the national economy. This sector also makes positive contribution in satisfying needs of consumers, in raising social welfare and in bringing industrial growth. Even  theoretical opposition to private sector is very weak and privatisation is a normal practice in many areas of national economy. The public sector is needed but undue importance need not be given to it. The overall preference should be towards privatisation.


In India, public sector was given priority for a long period. As a result, it was dominating the economy. This situation changed in recent years due to economic reforms, liberalization and globalization. At present, the policy is favourable to private sector. The process of disinvestments is also favourable to privatization.


The scope for private sector is rapidly expanding. There is no opposition to privatization as it was in the olden days. Moreover, the performance of public sector is also not satisfactory as many Public Enterprises are incurring losses over years. The position of private sector is quite satisfactory.


The major policy changes introduced since July’91 are favourable to the process of privatization in India. Such policy changes include removal of entry barriers, reduction of areas reserved for public sector, liberalization of imports and of foreign investment and move towards disinvestments.


The disinvestments process needs to be given speed in order to have large-scale privatization of Indian economy. However, the disinvestments process is facing many difficulties in the recent period. Disinvestments of nearly Rs. 10,000/- crore of the PSEs shares in the next few years is necessary for the rapid expansion of private sector in India. The process of privatization is likely to move with speed in the newer future. This should be treated as a trend in the right direction.


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