Question

Explain four benefits of privatisation.

Discuss two arguments in favour of privatisation.  

Answer 1

The following are the benefits of privatisation:

1. Poor Performance of Public Enterprises: In view of losses incurred by a number public sector undertakings, it has become an economic burden on public exchequer. Privatisation would be helpful in reducing this financial burden. 
2. Rising Budgetary Deficits: The budgetary deficits in India are increasing considerably and further contribute to rising prices. To reduce budgetary deficits, the scope of public sector should be contracted and that of private sector be expanded.
3. Greater Flexibility in Decision-making: Public sector enterprises normally do not have sufficient functional autonomy. This often leads to delay in decision making. The policy of privatisation will lead to greater flexibility in the decision-making. The management would be free from any political intervention. It would be possible to take quick and timely decisions.
4. Creation of Competitive Environment: Transfer of ownership of public sector enterprises to the private sector would abolish their monopoly position. These enterprises will have to compete with other similar enterprises. As such a competitive environment can be created. These enterprises would be under pressure to increase production efficiency by using modern technologies.