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Q84 (IAS/2011) Economy › Government Finance & Budget › Fiscal deficit concepts Answer Verified

Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs) ? 1. The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt. 2. The Government no longer intends to retain the management control of the CPSEs. Which of the statements given above is/ are correct?

Result
Your answer: —  Â·  Correct: D
Explanation

The Government of India's disinvestment policy is not primarily aimed at paying back external debt, nor does it intend to universally relinquish management control. Statement 1 is incorrect because disinvestment proceeds are primarily used to finance social sector and developmental programs, bridge the fiscal deficit, and fund infrastructure projects [2]. While proceeds can help manage public debt generally, they are not specifically earmarked 'mainly' for external debt repayment. Statement 2 is incorrect because the government distinguishes between minority stake sales and strategic disinvestment. In minority sales, the government explicitly retains majority shareholding (at least 51%) and management control [3]. Management control is only transferred during 'strategic disinvestment' or 'privatization' [2]. Since the government continues to pursue minority sales as a common method, it cannot be said that it 'no longer intends' to retain control.

Sources

  1. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > Objectives > p. 106
  2. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.26 Strategic Disinvestment > p. 104
  3. [3] https://cag.gov.in/uploads/download_audit_report/2020/CHAPTER%20III-061c1ab81b47ce6.63330903.pdf
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SIMILAR QUESTIONS

IAS · 2003 · Q85 Relevance score: -0.36

With reference to Government of India’s I decisions regarding Foreign Direct Investment (FDI) during the year 2001- 02, consider the following statements: 1. Out of the 100% FDI allowed by India in tea sector, the foreign firm would have to disinvest 33% of the equity in favour of an Indian partner within four years. 2. Regarding the FDI in print media in India, the single largest Indian shareholder should have a holding higher than 26% Which of these statements is/are correct?

IAS · 2010 · Q73 Relevance score: -0.99

With reference to the National Investment fund to which the disinvestment proceeds are routed, consider the following statements: 1. The assets in the National Investment Fund are managed by the Union Ministry of Finance 2. The national investment fund is to be maintained within the Consolidated Fund of India 3. Certain Asset Management companies are appointed as the fund managers 4. A certain proportion of annual income is used for financing select social sectors Which of the statements given above is/are correct?

IAS · 1996 · Q21 Relevance score: -1.03

The following Table shows the percentage distribution of revenue expenditure of Government of India in 1989-90 and 1994-95 .Based on this table, it can be said that the Indian economy is in poor shape because the Central Government continues to be under pressure to

Years | Defence | Interest Payments | Subsidies | Grants to States/Uts | Others
1989-90 | 1.5.1 | 2.7.7 | 1.6.3 | 1.3.6 | 2.7.4
1994-95 | 1.3.6 | 3.8.7 | 8 | 1.6.7 | 2.3

CAPF · 2013 · Q96 Relevance score: -1.52

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IAS · 2015 · Q60 Relevance score: -2.24

With reference to the Union Government, consider the following statements : 1. The Department of Revenue is responsible for the preparation of Union Budget that is presented to the Parliament. 2. No amount can be withdrawn from the Consolidated Fund of India without the authorization from the Parliament of India. 3. All the disbursements made from Public Account also need the authorization from the Parliament of India. Which of the statements given above is/are correct?