Privatization: “Refers to the sale of all or parts of a government’s equity in state owned enterprises to the private sector.”

Privatization means the transfer of managerial control of any public sector units to any private entrepreneur or to any private corporate body is called privatization.

Arguments in favour of privatization:

1. Greater flexibility in making decisions: Sometimes PSUs suffer losses just due to inadequate autonomy in the ‘decision making power’ of the management. If the PSUs are privatised, then the production and investment decisions of the management would be free from any Government intervention, and they would be purely guided by profit motive.

2. Improvement in Managerial Efficiency: Privatization is a means of improvement in managerial efficiency because the private sector is almost free from political interference.

When many areas of industial production are opened up for the private sector enterprises, then their investment in the industrial sector is expected to increase to a large extent. Higher investment would mean creation of greater employment and income opportunities within the economy.

Arguments against privatisation: 

1. Social welfare aspect is neglected: The private sector enterprises operate mainly for the maximisation of profit. Hence this measure does not guarantee the social welfare of the common people. 

2. Imbalanced regional development: Industries requiring huge investment but yielding low returns are not taken over by the private sector.