What is meant by disinvestment? State any two objectives of disinvestment.

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**Disinvestment** is the process by which the government reduces or completely withdraws its ownership stake in a public sector undertaking (PSU) by selling shares to private investors, financial institutions, or the general public through the stock market. It is distinct from full privatisation, since disinvestment can leave the government with a majority or a residual minority stake while still transferring some ownership (and, in strategic disinvestment, management control) to private hands.

**Objectives of disinvestment:**
1. **Raising resources:** Disinvestment proceeds provide the government with non-tax revenue, which can be used to reduce fiscal deficit or fund development expenditure.
2. **Reducing the fiscal burden:** Many PSUs, especially in competitive or non-strategic sectors, have run at a loss; disinvestment (or full exit) removes the recurring burden of supporting them from the budget.
3. **Improving efficiency:** Private shareholding brings greater market discipline, professional management practices, and accountability to quarterly performance, which can improve the efficiency of the enterprise. …

Q.What is meant by disinvestment? State any two objectives of disinvestment.

Concept understanding — Public Sector and Private Sector

Q.What is meant by disinvestment? State any two objectives of disinvestment.

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