Submitted By –
Business environment is a
combination of all factors that
influence a business.
Before 1947, activities of public sector were restrict
ed to a limited field like irrigation, power, railways,
ports, communications and some departmental
After Independence, the area of activities of the publ
ic sector expanded at a very rapid speed.
Industrial policy resolutions of 1948 & 1956 ensured
that the activities of the private sector will not be curbe
These polices divided the economy
broadly into two.
Some activities were left for public sector,
some for both public and private sector, and
some entirely for private sector.
Privatization means transfer of ownership
and or management of enterprise from publi
c sector to private sector.
Privatization the transfer of ownership of
State Owned Enterprises (SoE) to the priva
te sector by sale (full or partial) of going con
cerns or by sale of assets after the liquidatio
n of the company
- World Bank
Privatization - History
The seeds were laid in the UK in
First mentioned in 1960 in the
book : The Age of Discontinuity by
Spread in 1970 by the then PM
Privatization - Objectives
To increase efficiency & competitive power
of the enterprises.
To strengthen industrial management.
To earn more & more Foreign currency.
To make optimum use of resources.
To achieve rapid industrial development of
Privatization - Advantages
Reduction in economic burden
Increase in efficiency
Reduction in sense of irresponsibility
Reduction in Political Interference
Privatization - Disadvantages
Lack of social welfare
Increase in inequality
Increase in unemployment
Exploitation of weaker section
The action of an organisation or
government selling or liquidating an asset
Disinvestment - Objectives
To reduce the financial burden on gover
To improve public finances
To introduce, competition and market
To increase growth of the firm
To encourage wider share of ownership
Disinvestment - History
The Indian economy had virtually embraced
bankruptcy during the period of 1980-92.
In 1991, there was 236 operating public sec
tor undertakings, of which only 123 were
The top 20 profit making PSU’s were respo
nsible for 80 percent of profits.
The return on public sector investment for th
e year 1990-91 was just over 2 percent.
Disinvestment - Advantages
In Private Sector, the decision making
process is quick.
Better corporate governance, exposure to co
Loss making PSUs can be revived which can
boost up the economy.
Disinvestment - Disadvantages
Selling of profit-making PSU results in loss
of regular source of income to the government.
Asset stripping by the strategic partner.
Disposal of profit making PSUs.