The new economic policy and privatization in India

Abstract

Privatization in India is still low key. Privatization for ownership transfer is limited to disinvestment of public sector enterprises (PSEs) for raising non-inflationary resources. Privatization for shifting the divide between public and private sector is more active. This has been accomplished by removing barriers to entry. At the same time there is gradual withdrawal of budgetary support to PSEs resulting in a gradual dilution of equity as enterprises tap the capital market. Simultaneously, economic liberalization policies have emphasised a level-playing field for the public sector. Despite an obvious policy for a redivide there is as yet no comprehensive policy on privatization. Perhaps the approach is politically expedient. In terms of economic management and more so public sector management lack of a comprehensive policy on privatization can result in unexpected outcomes which may not be all that expedient. This paper analyses some of the impact of a non-policy on privatization.