What Is Privatisation In Economics?

What Is Privatisation?

In economics, privatisation refers to the transfer of business or property from the Govt. to the private sector, individual or non-governing party. India reforms privatisation in budget 1991, the budget known as “New Economic Policy or LPG policy.

In other words privatisation refers to the transfer of ownership control & management from public sector, Govt enterprises to private sector enterprises.

Features & Characteristics Of Privatisation

  • Privatisation involves transfer of ownership.
  • It reduces the state level control over the Indian economy.
  • It increases competition in the market.
  • It improved the efficiency.
  • It improved the investment potential.#It deals with short term profits over long-term or environmental goals.
  • It focuses on profit motive.
  • Privatisation leads to the use of market pricing for goods and services.
  • It leads to cost saving, better quality service and increased innovation.

Objective Of Privatisation

For the sake of clarification some of the most important objective of Privatisation are highlighted below:

  • Privatisation aims to improve delivery of service or asset management.
  • Reduce Govt debt by selling off assets and charging for services.
  • It deals with encouraging competition among other sectors or industries.
  • To attract investors and investment for quality and quantity of goods and services.
  • It aims to improve the capital investment capacity of industries or companies.
  • Reduction of political involvement.
  • Encourage Innovation for business development.
  • Providing strong base for the inflow of Foreign Direct Investment (FDI)Improve the efficiency of Public Sector Undertakings (PSUs)
  • It improves the economy by generating jobs and economic growth.

Ways Of Privatisation

  • Transfer of ownership
  • Disinvestment
  • Public auction
  • Public tender
  • Direct Negotiations
  • Lease with a right to purchase
  • Transfer of enterprises controlled by Municipalities.

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