Question

Why is the government of India disinvesting its equity in the Central Public Sector Enterprises (CPSE)?
1. The Government intends to use the revenue earned from disinvestment mainly to pay the External debt
2. The Government no longer intends to retain the management control of CPSEs
Which of the statements given above is/are correct?

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

The Correct Option is A

The question asks why the Government of India is disinvesting its equity in Central Public Sector Enterprises (CPSEs). We are given two statements and need to identify which one(s) are correct.

1. The Government intends to use the revenue earned from disinvestment mainly to pay the External debt. 

2. The Government no longer intends to retain the management control of CPSEs.

Let's evaluate the correctness of each statement:

Statement 1: The Government of India's primary goal with disinvestment is to raise revenue. While there are multiple reasons for disinvestment, using it to pay external debts is one possible reason. Therefore, this statement could be partially correct as the funds can be used for various financial needs, including debt repayment.

Statement 2: Disinvestment does not necessarily mean the government will lose management control. Instead, the government may still hold significant influence even if its equity is reduced. In many cases, especially with strategic sales, the government's control or influence might either be retained or thoughtfully restructured.

The correct answer is 1 only because statement 1 aligns with potential fiscal uses, while statement 2 does not necessarily reflect the primary objectives or outcomes of past disinvestment actions.

Correct Answer: 1 only