Privatisation: Strengths and Weaknesses-English Essay, Paragraph, Speech for Class 9, 10, 11 and 12 Students.

Privatisation: Strengths and Weaknesses

Privatisation is a multi-meaning concept. It conveys a variety of meanings. In a narrow sense, privatisation means sale of State-owned equity shares to private shareholders, change of ownership of units of production from the State agencies to the private sector and introduction of private management and control. In a broader sense, it means extension of autonomy for the public sector, debureaucratisation of the public sector, deformalisation of provisions and administrative instructions, decentralisation of authority to decide, plan and act, promotion of competition, privatisation of public resources, etc.

Privatisation is a global phenomenon and has assumed popularity across the world, irrespective of socio-political ideologies of different States. It has finally stepped on the Indian soil wearing the mask of mass welfare, providing a forum for hot debate in economic spheres. Initially, it was the then British Prime Minister, Mrs. Margaret Thatcher, who, by launching her Conservative Party campaign in 1979, first gave currency to the term Privatisation. Thereafter, France privatised 29 banks and four major industries in 1981. Then it was the turn of Germany, which handed over 958 companies to private owners. Then privatisation became worldwide, with Pakistan, Thailand, Malaysia, Brazil, Mexico, Chile, Japan and China all resorting to large-scale privatisation.

After Independence, India had adopted the Russian variety of planned economy under Jawaharlal Nehru. This helped us to achieve self-sufficiency in agriculture and build the modern industrial economy. So far, the private sector has helped us in achieving import substitution of consumer goods, whereas the public sector has filled the void of infrastructure and basic industries, contributing 25 per cent of the Gross Domestic Product (GDP). Despite the positive role played by the public sector in the rejuvenation of Indian Economy, this sector has come in for sharp criticism from several quarters and for several reasons. Ours is a mixed economy. In it the public and private sectors play important role. On Oct. 31, 2008, barring 6 Insurance companies and 2 Financial Institutions there were 217 public sector entrepreneurs under Central Government.

The most powerful argument in favour of privatisation of nonstrategic sector undertakings lies in the fact that while the public sector units have been incurring heavy losses year after year, privately owned units continue to make profits in the face of all odds. Severe constraints on resources for the public sector and the desirability of keeping it within manageable and monitorable limits demand that India insist on a large mobilisation of resources by the entrepreneurs and much smaller drafts on the public financial institutions. Thus going the whole hog for privatisation after writing off recurring losses in the public sector, the enormous funds thus released could be used for more profitable purposes in the infrastructural areas like transport, telecommunications, technical education and the like. The 11th Five-Year Plan (2007-12) which is in operation set the stage for raising average Gross Domestic Product (G.D.P) rate to 9 per cent from 7.6 per cent in the previous paving the way to ameliorate the situation in the days to come. Besides, enough funds can be pumped into employment-generating schemes for the poor in the rural as well as urban areas.

Through privatisation, working of the sick public sector units can be commaríded by the discipline of the market mechanism instead of the indiscipline of bureaucratic mechanism. Second, the privatisation of public sector would lead to the exit of unviable sick units basking in favour of a lease of life in the name of socialistic pattern of production. Third, it would put a sizeable quantum of resources at the disposal of the Government and act as a budgetary support to reduce deficits. Privatisation of public enterprises is desirable with a view of making these enterprises attract foreign investment on commercial terms instead of being financed by aid or subsidised loans. Above all, it would bring an end to the monopoly of the public sector in some areas.

Attracting multinationals must be part of a drive to join globalisation of the world economy. If India keeps the multinationals out, it will effect, be keeping international trade out.

No longer is it feasible, beyond a point, to delink export growth from going multinational. Either Indian companies themselves must go multinational (as the Japanese and Korean ones have), else India must attract multinationals on a large scale. Direct Foreign Investment (FDI) is an essential part of the privatisation of the economy. Far from eroding India’s self-reliance, foreign investment will actually strengthen it. India’s reliance on foreign loans has led it into a debt trap. It needs a judicious mixture of foreign loans and equity. Latin American countries, which relied entirely on debt, have lost all self-reliance. Asian countries that attracted foreign equity are much stronger and more self-reliant. Moreover, earnings on equity tend to be ploughed back in a manner while the interest on loans is not. Foreign equity can also bring in specialised skills and technology that cannot be purchased outright.

There is need to refute criticism that privatisation and market-oriented globalisation will worsen the condition of the poor and disadvantaged people. On the contrary, nothing will help our poor more than the prosperity which privatisation will bring. The social indicators are, by most yardsticks, far better in the market economies of the West than they ever were in the erstwhile Soviet Union. Social Democrats in Sweden and Germany have long proved that social justice is entirely compatible with markets and multinationals and that the two, in fact, aid each other.

On the contrary, advocates of the privatisation of the public sector should not be guided only by the glitter of the market economy but look to the consequence of such a course of action followed in other Socialist countries. There the public sector units, handed over to private entrepreneurs in the flush of moment, have almost gone bankrupt, threatening large-scale unemployment and social unrest, such as suffering, poverty, ill-health and exploitation of the masses. The remedy may prove worse than the disease. Hence, the advantages and disadvantages of privatisation can be sorted out through a prudent analysis.

Civil aviation, postal services, transport and the power sector are heavy loss-incurring activities and a drain on the national exchequer. Privatisation is the only way to get rid of this malady. Coal mining is also a loss-incurring sector. But it should not be handed over to the private sector completely. Only its management can be entrusted to the private sector. Steel, banking and insurance can be handled both by the private and the public sector so as to put an end to the misuse of public funds for private gains.

For globalisation, our business environment must be changed to resemble that in the global economy. Discrimination against export production must be done away with. Material and capital should be available to Indian exporters, including their subsidiaries in India, at international prices. Companies must be given a free hand in their plans for diversification and expansion. This does not rule out protection for Indian companies. As in other Asian countries, there is a case for protecting our industries, but the protection must be limited and not be open-ended. There must also be enough competition to penalise inefficient firms.

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