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CA Foundation · Business Economics · Indian Economy

The government sells 10% of its equity in a profitable public sector company to the public, retaining 90% and full management control. The company's total equity is valued at ₹5,000 crore. Which statement is correct?

The government raises ₹500 crore, being 10% of ₹5,000 crore. Because it retains 90% ownership and management control, this is partial or minority disinvestment rather than privatisation, which requires transfer of control to private hands. The ₹4,500 crore figure is the value of the retained stake.

  1. AIt raises ₹500 crore and this is partial disinvestment, not privatisation in the strict senseCorrect
  2. BIt raises ₹4,500 crore and this is full privatisation
  3. CIt raises ₹500 crore and this is full privatisation
  4. DIt raises ₹5,000 crore and this is nationalisation

Explanation

10% of ₹5,000 crore = ₹500 crore. Since the government keeps 90% and management control, ownership and control remain with the state. This is minority disinvestment. Strategic sale with transfer of control would be privatisation. ₹4,500 crore is the value retained, not raised.

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