Glossary term
Privatisation: Meaning and Definition
Reviewed and approved by Dr. Anamika ShrivastavaPublished Last updated
Privatisation means shedding the government’s ownership or management of public sector enterprises, either by withdrawing from them or by selling them outright. Selling part of a firm’s shares to the public is disinvestment. The stated aims are better financial discipline, modernisation and use of private capital.
In more detail
Privatisation can mean full sale, partial sale of shares, or leaving a sector to private firms. Supporters expect better management and release of public funds; critics worry that valuable assets are sold cheaply and that public services suffer. India has mostly chosen partial sales and autonomy for profitable enterprises.
Example
When the government sells a portion of its equity in a public sector company to investors, it is carrying out disinvestment.
Key points
- Two methods: withdrawal and outright sale.
- Disinvestment sells part of the equity.
- Critics say assets were undervalued.
Common mistake
Assuming privatisation means closing public enterprises.
Related terms
Where it is explained
This term is explained in Class 11 Indian Economic Development Chapter 3: Liberalisation, Privatisation and Globalisation: An Appraisal.