How DIVESTMENT helps the economy?

PSUs refer to any enterprise or company where government holds ownership by gaining 51% or more than 51% stake in equity. The government always play at its best and also engages itself in each and every operation of company for improvement and strengthening the company. But government may also choose to divest in the company if it needs to bring improvement in the economy.

How divestment can help revive economy?

Divestment can improve the efficiency of any PSU. Divestment can increase privatization in the market which in return, can entail modernization in the economy. It is known that government interference in any enterprise brings inefficiency as it can create a lot of hindrances, an enterprise can’t operate freely. PSUs need to be given more autonomy to operate efficiently so that they can compete accordingly by the international standard and moreover, divestment in an enterprise can open possibilities of boosting capital market as investors may feel that there are possibilities of high profit making by investing in the enterprise.

Divestment also helps government generate a large amount of money to mitigate fiscal deficits and moreover, to spend more on subsidies to the public. Increase in social welfare programs helps in increasing aggregate demand in the economy. It can also help revive those units which are sick but can be revived and ultimately, ends up bringing growth in the economy.

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