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Privatization is the process of transferring the ownership of a business, enterprise, agency, from the government i.e. from the public sector to the private sector for the motive of profit.


Privatization is the process of transferring the ownership of a business, enterprise, agency, from the government i.e. from the public sector to the private sector for the motive of profit. It is a broader concept and its meaning differs from countries to countries. It is the induction of the participation of the private sector in the ownership of the public sector. In 1991 the new Industrial Policy introduced the concept of Liberalization, Privatization & Globalization.


One of the main statements for the privatization of publically owned missions is the estimated increase in the efficiency that can result from private ownership and business practices. The thought of the increased efficiency comes with a great importance that the private firms will maximize the profit.


India is a mixed economy which consists of both the sector i.e. the public sector and the private sector. The various activities are performed by these sectors in accordance with the regulations. In 1991 the public sector was affected by the inefficiencies in a non-sustainable manner.

In India, the privatization was in the unique form in accordance with the precedence of our mixed economy as well as by operational aspects of the Public Sector Undertakings. In India the privatization is introduced mainly to enhance the efficiency of the public sector enterprises.


After the industrial policy of 1991, the government has adopted disinvestment, strategic sale of minority shares to the private partners and selling of loss making units to the private sector. The main form of inviting the private participation was disinvestment which results in the transfer of the minority shareholding to the general public, and at the same time the government was holding 51 percent shares. The sale of minority interest to private sector has enabled the government to insert competitive and efficient private sector business practices in government enterprises or in public sector. In a country like India, Privatization in the today’s concept is seen as a means of increasing output, reducing unit costs, raising cash to reduce the debt of the public.


As the economy of the world tends to become one global part, privatization as a policy standard seems to override political pressure as an instrument for achieving competitive efficiency and resource optimization.

Privatization is beneficial for the growth and sustainability of the state-owned enterprises. Indian government also followed the trend of privatization which was prevailing across the world and introduced in the 1990s.

There is a need of privatization for achieving an increase in the output of the country at a rapid scale which will help in improving the quality of the products by reducing unit costs, raising the cash to reduce the debt of the public.

Privatization is always helpful in keeping the need of the consumers at the uppermost level, it helps the government in paying their debts, in helps in increasing the long duration jobs and promotes competitive efficiency and open market economy. In the era of rapidly rising economy in India there is a need of government to realign its priorities in mobilizing the skills and resources of the private sector in the larger task of development.

In the current scenario privatization is seen as the solution towards the problems of the public enterprises as these enterprises on being transferred from the public to the private hands will become less politicized which as a result will help in ceasing the administrative corruption.

It also helps in increasing the tax revenues from profits and strengthening the public treasury. The advantages of the privatization can be perceived or sense from both micro-economic and macroeconomic impacts that privatization exerts.

India having a mixed economy having a tremendous potential for growth. The economy which used to rise at 3-4 percent of GDP which has steadily rising growth to 9.5 percent after the introduction of the reforms. Privatization will give abundant space for creative and innovative thinking as well as systematic and strategic planning to realize the full potential of economy.


The concept of welfare state may get defeated with the Privatization of economy. The sole objective of the private sector is to earn profit and they would not care about the society.

Simultaneously the Government or the Public sector companies also keep doing the social work under the (Corporate Social Responsibility) CSR policy. In case of the privatization, it results in the fewer funds of the society because private companies have no problem or obligations in doing the social work.

Privatization will also result in the curtailment of the employees. In private sector enterprises there is emphasis on the performance which indirectly results in the work pressure and meeting the deadlines or the targets and individuals who have been doing the work for years without much pressure; it is difficult to adjust to a new setting and many of them leaving their services or jobs.

Risk of the short term gains is more conspicuous in the private companies. There are decisions taken to start the ventures which results in the short term benefits but it may not be fruitful for the long duration.


Everything has the good and bad aspect so as privatization. There are many goods things happened after the new industrial policy in 1991 came and introduced the privatization. Privatization gives the private sector to come in the fields in which they were not allowed before the new industrial policy. In every field the private sector can work except in the three fields i.e. atomic, mining and railway. In these three industries only the private sector can indulge no private sector is allowed. The main motive of private companies is to make more and more profit which will increase the economy of the country. So, Yes the Privatization is the need of the hour for the Indian economy.

Author(s) Name: Sakshi Batham, BBD University)