The disinvestment policy in India was introduced by the Government of India itself.
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The disinvestment policy in India, which involves the sale or dilution of government-owned assets in public sector enterprises, was introduced by the Government of India itself. This policy was initiated in order to reduce the burden on the government, promote competition, and improve the efficiency and performance of public sector enterprises. Let’s delve into some interesting facts and insights about disinvestment in India.
- Historical Background:
Disinvestment in India can be traced back to the late 1980s when the government started implementing measures to liberalize the economy. However, it was in the 1990s, under the leadership of Prime Minister P.V. Narasimha Rao, that disinvestment gained significant momentum as one of the key economic reforms in India.
- Key Objectives:
The primary objectives of disinvestment in India include promoting economic growth, reducing the fiscal burden on the government, attracting private sector participation, improving corporate governance, and unlocking the value of public sector enterprises.
- Methods of Disinvestment:
Disinvestment in India can be carried out through various methods, such as public offerings through the stock exchanges (Initial Public Offerings or Follow-on Public Offerings), strategic sales to private entities, sale of minority shares to institutional investors, and exchange-traded funds.
- Role of Disinvestment Commission:
The Disinvestment Commission, established in 1996, played a significant role in guiding the disinvestment process in India. The commission examined the various aspects of disinvestment and made recommendations to the government, ensuring transparency, and providing expert advice.
- Impact on Economy:
Disinvestment in India has had both positive and negative impacts. On one hand, it has contributed to the mobilization of capital, reduction in fiscal deficits, and increased competition. On the other hand, concerns about job security, resistance from trade unions, and the impact on strategic sectors have been raised.
In the words of former Prime Minister Manmohan Singh, “Disinvestment of government equity in the public sector is a reflection of the growing maturity of the Indian economy and the increasing global integration of our corporate sector.”
To provide a summary of some notable disinvestments in India, here is a table highlighting a few key examples:
|Company||Year||Method||Value (in crore rupees)|
|Hindustan Zinc Limited||2003||Strategic Sale||769|
|Maruti Suzuki||2003||Public Offering||1,250|
|ONGC||2010||Follow-on Public Offering||22,500|
Please note that the table above is just a sample, and there have been numerous disinvestments in various sectors in India over the years.
In conclusion, the disinvestment policy in India was introduced by the Government of India itself as a means to promote efficiency, reduce fiscal burden, and encourage private sector participation. It has been a key aspect of economic reforms in the country, attracting both praise and criticism while shaping India’s corporate landscape.
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In August 1996, the Disinvestment Commission, chaired by G V Ramakrishna was set up to advice, supervise, monitor and publicize gradual disinvestment of Indian PSUs.
The Chandrashekar government took the bold decision on disinvestment on 4th March, 1991.
The disinvestment policy in India was started two decades back where minority share-disinvestments of PSEs have been followed till now. In the fiscal year 1991- 1992, the Chandrashekar Government has proposed to disinvest up to 20 percent share in PSUs where mutual funds and institutional investors have taken that much equity.
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When was disinvestment policy started in India?
In the Interim Budget of 1991-92, it was announced that the Government would disinvest up to 20% of its equity in selected PSEs in favour of mutual funds and financial and institutional investors in public sector.
What is the history of disinvestment policy in India?
Response to this: In 1996, the Government of India set up a Disinvestment Commission under the Ministry of Industries; the mandate of the commission was to assess the viability and advice the Government on disinvesting various PSE’s through market development and diversifying transfer of ownership of the PSU’s for five-ten years period.
Where did disinvestment originate?
Answer will be: disinvestment (n.)
"reduction of investment," 1938, in writings of J.M. Keynes, from dis- + investment. The verb disinvest in the economic sense is a back-formation attested from 1961. Related: Disinvested; disinvesting.
What is disinvestment policy in India since 1991 Upsc?
Answer will be: Disinvestment Policy in India
PV Narasimha Rao government in 1991 initiated a disinvestment policy and announced that government would disinvest up to 20% of its equity in selected PSUs mainly through mutual funds and FIIs (Financial institutions investors).
What is disinvestment in India?
As an answer to this: (May 2020) Disinvestment in India isa 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.
When did the Disinvestment Commission start in India?
The response is: India’s transformation began in 1991-92, with the disinvestment of 31 public sector undertakings. The Disinvestment Commission, chaired by G V Ramakrishna, was established in1996 to provide recommendations, manage, monitor, and promote the gradual disinvestment of Indian public sector undertakings.
Why did India start a disinvestment route in 1991?
As an answer to this: Government sector inability to innovate, take quick and timely decisions, and significant interference in decision-making processes, among other things. As a result, in 1991, the decision was made to pursue the disinvestment route. India’s transformation began in 1991-92, with the disinvestment of 31 public sector undertakings.
Why did India disinvest?
The decision to disinvest is mainlyto 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).