Privatisation or "disinvestment" as the government prefers to call it, has seen some major highs and lows since independent India. The BJP led NDA government has always been a keen supporter of the process and has at several points between 1999-2004 and 2014-2018 taken up strategic disinvesting steps. In the past, these decisions have mostly proved to be good enough as PSUs flourished under the private sector companies they were sold to.
However, recently when the economy was grappling with one of the worst pandemics in human history, the Finance ministry under the Modi government declared privatisation of PSUs in non-strategic sectors. As part of the Rs. 20 lakh crore stimulus package announced in May, 2020, Nirmala Sitharaman also limited the number of PSU's in strategic sectors to 4 with the aim of minimising wasteful administrative costs.
This simply means that the government will observe a very restricted presence in 18 identified strategic sectors mainly including banking, petroleum, steel and insurance while completely exiting others. The private sector participation is expected to bring innovation and efficiency along with better management practices with the realisation of the huge potential these sectors hold. Apart from the fact that the government wanted to get rid of loss-making enterprises or induce budgetary requirements, the intent of disinvestment this time around is something else. The Modi government believes in the ideology that it has no business being in the way of business, so this seems a step in the right direction. The focus is not the revenue generated, rather the better put use to land, labour, capital and productivity gains to the economy.
However, the response doesn't seem to stand up to the promises made. In immediate terms, sensex crashed by over 1069 points as soon as the stimulus package including privatisation was announced. Several communities have always been opposed to disinvestment and believe it to be easier said than done.
Also, with Indian economy shrinking by a whopping 23.9% in the second quarter of 2020 didn't help much to support the privatisation decision by the government. Even though it's not a bad decision altogether, it needs to wait and be postponed until some time at least. The only focus at this moment should be to revive demand in the economy and bring it out of the downward spiral growth. Once the economy has settled down, the government can implement its full-fledged disinvestment programme.
