Q.Write a short note on: Disinvestment

Disinvestment is the government's sale of part or all of its shares in public-sector undertakings to private investors or the public, done to raise revenue, cut losses and improve efficiency. It became an important policy tool after the 1991 reforms. This is an AP Intermediate 2nd-year Economics topic on the public and private sectors.

Meaning: Disinvestment refers to the action of the government in selling or liquidating a part or the whole of its equity holding (shares) in public-sector undertakings (PSUs) to private individuals, companies or the general public. When only a minority of shares is sold, it is partial disinvestment; when a majority stake and control are transferred, it amounts to privatization.

Objectives / reasons for disinvestment:

1. To raise revenue for the government to meet its expenditure and reduce the fiscal deficit.
2. To reduce the burden of loss-making public units that drain the budget.
3. To improve efficiency, since private participation brings better management and accountability. …