Importance of Disinvestment

Presently, the Government has about Rs 2 lakh crore locked up in PSUs. Disinvestment of the Government stake is, thus, far too significant. The importance of disinvestment lies in utilisation of funds for:

• Financing the increasing fiscal deficit
• Financing large-scale infrastructure development
• For investing in the economy to encourage spending
• For retiring Government debt- Almost 40-45% of the Centre’s revenue receipts go towards repaying public debt/interest
• For social programs like health and education

Disinvestment also assumes significance due to the prevalence of an increasingly competitive environment, which makes it difficult for many PSUs to operate profitably. This leads to a rapid erosion of value of the public assets making it critical to disinvest early to realize a high value.