Indian Psus

Topics: Investment, Foreign direct investment, Macroeconomics Pages: 2 (822 words) Published: January 30, 2013
PSU’s have outlived their utility and must all be disinvested PSU stands for Public Sector Undertakings, any company which is entirely managed and run by the governed by the government or for which government is the major shareholder. When India gained its independence, the leaders decided that it would be in the interest of the economy to go with a social model as they were a nascent nation and if a capitalist model is followed, they again would be exploited. A large focus was on the industrial sector and a lot of manufacturing companies were opened by the government. Private players were either not allowed to entire the market or were highly regulated by License Raj, whereby, a company had to take permissions of nearly 80 regulatory bodies before producing anything. Most of the private banks were nationalized in two rounds to make sure that the money of the people stays in safe hands rather than leaving it in the hands of unaccountable private players. As a result, the growth rate was in the range of 2-3% and this came to be known as the Hindu Rate of Growth. The situation became so aggrieved that at one point in 1991, we had only 15 days worth of foreign exchange left and the nation was knocking on the doors of bankruptcy. IMF bailed India out and advised it to come up with economic reforms. As a result, India opened up its market with policies which came to b known as Liberalization, Privatization and Globalization (LPG) reforms, whereby the regulations on private players were reduced, MNCs were allowed to set up businesses in India and PSUs were disinvested. The impact of these reforms may be gauged from the fact that total foreign investment (including foreign direct investment, portfolio investment, and investment raised on international capital markets) in India grew from a minuscule US$132 million in 1991–92 to $5.3 billion in 1995–96. The list of companies that were privatized includes some of the biggest names of the industry like Maruti Udyog, BALCO,...
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