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CMA Foundation · Fundamentals of Business Economics and Management · Economic and Business Environment

Which of the following best describes 'privatisation' in the context of India's economic reforms?

Privatisation means shifting ownership or management of public sector enterprises to the private sector, such as through disinvestment of the government's shareholding. It reduces the state's role in business activity, unlike tariff hikes, price controls or tighter government control over banks.

  1. AIncreasing government control over banks
  2. BTransferring ownership or management of public sector enterprises to the private sector, including through disinvestmentCorrect
  3. CImposing higher tariffs on imported goods
  4. DFixing prices of essential goods by the government

Explanation

Privatisation means reducing the state's role by transferring ownership or management of public enterprises to private parties, for example through disinvestment of government shareholding. Higher tariffs and price fixing are protectionist or control measures, and greater control over banks is the opposite direction.

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