Question

"In the post-reform period the government of India decided to privatise profit making Public Sector Undertakings (PSUs)." Do you agree with the given statement? Give valid arguments in support of your answer.

Hint:

India has the right mix of skills, cost advantages, and infrastructure to make it a preferred outsourcing destination. Privatisation of PSUs was seen as an essential step towards improving economic efficiency and facilitating growth

Answer 1

Privatisation of Profit-making PSUs: The decision to privatise profit-making PSUs in India post-reforms had several justifications: - Efficiency and Competitiveness: By transferring ownership to the private sector, the government aimed to improve the efficiency of PSUs and make them more competitive in the global market. The private sector is generally seen as more agile and focused on profitability, which helps in achieving better management practices. - Reducing Fiscal Deficit: Selling off profitable PSUs helps raise revenue for the government, which can then be used to reduce fiscal deficits or fund welfare programs. The proceeds from privatisation were expected to ease the pressure on public finances. - Liberalisation of the Economy: The privatisation of PSUs was part of the broader economic reforms of 1991, which sought to liberalise and open up the Indian economy to more market-driven forces, leading to growth in various sectors. - Encouraging Foreign Investments: The privatisation of PSUs created opportunities for foreign investors to enter the Indian market, boosting FDI and fostering a more vibrant economy. Thus, privatising profit-making PSUs was seen as an essential step towards improving economic efficiency and facilitating growth in a liberalised environment.