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This article provides information about the impact of privatisation on Indian economy:
Along with the liberalisation of the economy in the 1980s the neo-liberals of the U.K. and the U.S. also advocated the privatisation of industries and services to make enterprises more competitive and efficient so as to meet the challenges of the global economy.
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The U.K. privatised 80% of its public sector by the 1980s. Privatisation largely means selling of public owned assets to private ownership by stages.
Privatisation can be done using any or all of the following techniques:
i. Public offering of shares – all or parts of the shares of public limited company are offered for sale to the public;
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ii. Private sale of shares – all or part of the state- owned enterprise is sold to private individual or a group of purchasers;
iii. New private investment in a state-owned enterprise – private share issues are subsidised by the private sector or the public;
iv. Entry of the private sector into public sector – private groups allowed to get into areas reserved for the public sector, such as the power and telecommunications sectors in India;
v. Contracting out the services and utilities to private operators or contractors for operation and maintenance, while retaining ownership with the government. Like water supply, sewage treatment, etc.;
vi. Sale of government or state enterprises’ assets as private sale instead of shares;
vii. Reorganisation or fragmentation of subsidiary units of a company;
viii. Management/employee buy-out – in which the management or the employees acquire the controlling interest in which shares are purchased on credit extended by the government.
With the aim of privatising the economy, the Indian government adopted various measures in the 1990s. Initiatives such as abolition of licence raj for deregulation of the industries, scrapping of legislations such as MRTP and FERA, approval for 100% equity for NRIs, streamlining of approval committees, disinvestment in Public Sector Undertakings (PSUs), and reference of sick industrial units to Board of Industrial and Financial Reconstruction for rationalisation were meant for more and more privatisation of the Indian economy.