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GS Economy Industrial Sector
Q.

Consider the following statements:

1. Disinvestment is usually undertaken to improve financial discipline and facilitate modernisation of the concerned PSE.

2. Disinvestment can prevent the inflow of FDI (Foreign Direct Investment) to the respective Public Sector Undertakings (PSUs).

Which of the statement(s) given above is/are correct?
Explanation:

ANSWER: (A)

Statement 1 is correct.

  • Privatisation of the public sector enterprises by selling off part of the equity of PSEs to the public is known as disinvestment. 
  • The purpose of the sale, according to the government, was mainly to improve financial discipline and facilitate modernisation. 
  • It was also envisaged that private capital and managerial capabilities could be effectively utilised to improve the performance of the PSUs. 

Statement 2 is not correct.

  • The government envisaged that privatisation could provide strong impetus to the inflow of FDI.
  • The government has also made attempts to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions. 
  • For instance, some PSUs have been granted special status as maharatnas, navratnas and miniratnas 

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