Question

Do you approve of disinvestment as a prudent means of financing budget deficit?

Answer 1

Disinvestment occurs when the government chooses to sell its stake in public sector or joint sector enterprises. This leads to 'privatisation'. Presently, this seems to be the only effective remedy available with the government to finance the deficit. However, the government should be careful about two points:

(i) It should unload shares of only inefficient enterprises, Otherwise, it would not only be lowering its asset holding, but also closing a regular source of income, and

(ii) Money received through disinvestment should not be used for purpose of political popularity (to garner votes). Instead, it should be used as a productive investment.