MBA interview preparation- Privatization of public sector in India
This is a very crucial topic in any GD or PI platform as lots of Public Sectors are getting converted into Privatization, hence, Private sectors.
What is Privatization
This means transfers of ownership, management and control of the public sector enterprises to the private sector. Privatization includes the migration of something from the public sector to the private sector.
Aim of Privatization
- to increase the efficiency and to reduce the size of the public sector.
- To reduce public debt/deficit and to obtain funds.
- To strengthen the stock markets.
- Providing a strong base for the inflow of FDI.
- To improve the efficiency of public sector undertakings (PSUs).
In a country like India, privatization is considered as a way of increasing:
- Productivity
- Enhancing quality
- Lowering unit costs
- Reducing Government spending
- Raising cash to pay a down debt.
Pros and Cons of Privatization:
| PROS | CONS |
| Since, Private sector employees are paid well, they are motivated to work. | since corruption exists in both public and private companies, there is no certainty that privatization would result in reduced corruption. |
| bribe takers are dealt swiftly by private firms. Employees are afraid to take bribes as a result of this. | the cost of goods rises, as a result of privatization. For example- private petrol bunk charge far more than government-controlled bunks. |
| Private institutions pay more attention to cleanliness and give more amenities. | no welfare state- Since the private are mainly concerned about booking the profits, they tend to ignore the social good. |
| They have competitive attitude. As a result, they provide more features to the general population. | Less social development |
| The GDP of our countries rises as a result of the taxes paid by private institutions. |
Conclusion
- Corruption is not dependent upon whether it is private or public, it is entirely dependent on the mentality of the individual. However, privatisation can help to curve corruption to some extent.
- Government should lay more emphasis on welfare schemes contributing to the social development of the society. Government has the power to impose restrictions on rates, if the crisis due to privatisation, soar high to unprecedented levels.
- Privatisation definitely leads to job losses to some extent, but if the government is unable to run the entity and if the entity sinks, then it would lead to 100% job losses. If enough jobs are being created in some other sector, then job loss won’t be a major issue.
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