 | This article needs to be updated. (May 2020) |
Disinvestment in India is a policy of the Government of India, wherein the Government liquidates its assets in the Public sector Enterprises partially or fully. The decision to disinvest is mainly to reduce the fiscal burden and bridge the revenue shortfall of the government. The key engine in achieving growth in India during post-independence was played by Public Sector Enterprises (PSE). Among other responsibilities of PSE's post-independence, the social and developmental obligations of the nation were most important, which resulted in these units escaping competitive race. Later on the activities of the PSU's were divergent, concentrating towards more non-core areas like hotels and consumer goods among others. Further, the public enterprises were used as tools for political and bureaucratic manipulation; which was consequential in low capacity utilization, reduced productivity, failure to innovate, and complex decision-making processes on vital issues of development.
By the end of the 1980s, the growth of the PSE's had turned into, as expressed by some commentators, an "end in itself". These factors became an obstacle to the growth of India. Therefore, the poor performance of the PSE's called for reforms to address the weakness in India's development. After the change of Government in 1991, among many economic reforms launched; privatization was one, which focused on the efforts required to be taken to curtail the fiscal burden of the state by reducing public sector borrowings and bring in fiscal austerity.[1]