Almost everything in India was under the public sector until a few decades back. The scenario had been the same ever since the country’s independence in 1947. However, the public sector soon began to suffer losses in various fields and there was a shift to privatization. Public sector units have been serving the Indian public ever since their initiation post-independence. However, they have a set of limitations. Keeping this in mind, many sectors in the country have been privatized. The impact of privatization in India has been a topic of constant debate.
Long and Short Essay on the Impact of Privatization
Essay 1 (250 words)
Privatization is the process of shifting the public sector industries to the private sector. The decision for privatization is taken to lower the burden and role of the government in different industries. It affects the government in various ways. Government economics are impacted a great deal by way of privatization.
Effects of Privatization on Government Economics
The effect of privatization on government economics is largely positive. This can very well be judged by the speed at which the government is privatizing various industries that were once governed by the public sector. Many industries under the public sector in our country had been suffering major losses owing to poor management, inadequate knowledge of the owners and lack of proper resources. The brunt of this loss had to be borne by the government as public enterprises were funded by the government. It affected government economics adversely.
The decision of privatizing various sectors has come as a relief to the government. This has reduced the wastage of government resources and wealth. Privatization has led to power in the hands of more learned and skilled professionals. The government tests the efficiency of the prospective private owners before handing over the responsibility of a particular sector to them unlike when it is in the hands of the public sector. Until an industry is under the public sector it is governed by the government and there is a lot of interference from the political parties.
A lot of politics and corruption go about in such cases. A number of scams related to various sectors that have been revealed in the past are an example of the high level of corruption that takes place in the public sector. The finances that must be used to improve and enhance different services under the public sector are misused by corrupt government servants and politicians.
This corruption involving the misuse of the government’s wealth has subsided with the initiation of privatization. Hence, privatization has had a positive impact on government economics.
Essay 2 (400 words)
The banking sector in India was initially under the public sector. However, a number of factors led to the decision to the privatization of this sector. The impact of privatization of the Indian banking sector has largely been positive however it also has its set of drawbacks.
Impact of Privatization in Indian Banking Sector
Here is a look at the impact of privatization on the banking sector of our country:
- Increased Efficiency
With the privatization of the banking sector in India, the power to run this sector has gone in comparatively efficient hands. This has thus improved the condition of the banking sector in the country.
- Improved Services
Quite a few private banks have been opened in the country and the competition in this sector has led to improved service. Each bank is making an effort to provide better services to fetch more and more customers unlike earlier when people suffered due to the monopoly of the banking sector.
- Enhanced Schemes and Interest Rates
In an attempt to lure more customers and make more profit the private banks keep coming up with new schemes that offer a greater rate of interest and various other benefits to the consumers. This works for the benefit of the general public.
- Better Customer Support
With the privatization of the banking sector, the customer support service has also improved. Private banks have their own call centers that are dedicated to answering the queries of the customers, adhering to their complaints and taking service requests. This is a great add on for the customers who earlier had to visit the bank for each and every task.
- Misguidance to Earn Profit
Since private banks aim at making more and more profit to stay ahead of the competitors they at times use unfair means to amp their profit ratio. This may include providing incomplete or wrong information to the customers at the time of opening of the account or while rendering a loan or credit card. Customers often suffer due to this as they do not get the kind of return they are committed or have to pay more interest in case of a loan.
Just as various other sectors that have been privatized, the Indian banking sector has also benefitted largely by privatization. The services and schemes being provided by the banking sector have improved owing to the competition among different private banks. However, since the ultimate aim of the private bank owners is to earn a profit, they at times misguide their customers/ prospective customers to make a profit.
Essay 3 (500 words)
Privatization is the process of shifting the control of certain industries from the public sector to the private sector completely or partly. It was the first world nations that came up with the concept of privatization with the aim of improving the condition of services offered by certain industries besides lowering the burden of the government. However, soon developing nations such as India also took a cue from these countries and privatized various sectors. Privatization has both positive and negative effects on a country. The impact has differed from industry to industry as well as country to country. Here is a look at the positive and negative effects of privatization:
Positive Effects of Privatization
Here is a look at the positive effect of privatization:
- Reduced Government Debts
One of the major positive impacts that privatization has had is that it has reduced the government’s debts.
- Improved Services
The service provided to the customers has improved a great deal owing to the competition among the private sector owners.
- New Kind of Products
In order to stay ahead of the competition, private organizations try to come up with new and innovative products to meet the growing demands of the customers and create a foothold in the market.
- No Political Interference
With the shift from the public sector to the private sector, the interference of the political parties has been stopped in various industries.
- Competitive Rates
In the industries where the competition is high, the customers get the advantage of getting better services at lesser rates. In an attempt to increase their sales, the private owners provide goods and services at competitive rates.
Negative Effects of Privatization
Here are the negative effects of privatization:
- Profit Making
The sole aim of the private owners is to make a profit and they try to attain it at any cost be it compromising the quality of the product, playing with the customer’s emotions or adopting other unfair means.
- Price Rise
In sectors, where there is less competition or monopoly of a private owner, the consumers need to shell a huge amount of money to buy goods and services. There is a rise in the prices and the customers have no choice but to pay the same.
- Rise in Corruption
Private owners adopt various means to get their tasks accomplished. They indulge in bribery, fraud and various other such ill practices that give rise to corruption.
- Lack of Transparency
In a democratic government, the public can question the government for the service provided by the public sector and the government is bound to show the clear picture. However, the private sector organizations are not bound by any such law and thus there is a lack of transparency.
Privatization has led to numerous choices in various sectors. The same goods and services are offered at different rates, quality and variety by different private sector owners thereby adding to the confusion of the customer.
Thus, privatization has both positive and negative repercussions. While there are certain aspects in which the customers benefit owing to this shift, there are others wherein the customers have to suffer.
Essay 4 (600 words)
Meaning of Privatization
Many industries and sectors in India, as well as other countries, come under the public sector which means they are owned and run by government agencies. However, gradually there has been a shift from these being governed by the public sector to the private sector. This shift has been termed as privatization. A number of factors have led to this change. Many developed nations started out with privatization of different industries to overcome the limitations faced by the public sector and India followed the league soon.
Under privatization either the government-held assets have been sold to the private owners and they have been given the whole and sole responsibility of handling certain industries or the government has allowed the private businesses to participate in the functioning of some industries.
Reasons for Privatization
Here are some of the main reasons for privatization:
- Better Services
Until a particular industry is under the public sector, it is governed by the government. There is no competition and no drive to perform better. The services offered are mostly average as there is no comparison and no threat of losing the race. However, when a particular industry goes to the private sector, the private owners are expected to set a bar for the quality they are expected to deliver. They work hard and try to give in their best else they are at risk of losing the task assigned to them and suffering an immense loss. This ensures better service to the customers and has been one of the main reasons for privatization.
- Better Customer Support
Besides getting good service from the private sector employees, the consumers also get good customer support. The condition of the government-owned services in India is known to all. The government employees are least interested in completing their tasks on time. Consumers need to call up over visit their offices several times in order to get their tasks done. However, this is not the case with the industries that have been owned privately. This is another reason why privatization was considered.
- Cope up with Budget Deficit
The government has a particular budget set for each industry. It requires accomplishing all its tasks within that particular budget. Many industries under the public sector had begun suffering from losses and faced budget deficits. In order to cope up with this problem, the government considered the option of privatization.
Effects of Privatization
The impact or effect of privatization on the consumers and the nation as a whole is a major topic of debate. Here is how privatization has impacted society:
- Lowered Government Burden
The government has a limited budget assigned for every sector and many of the sectors were facing monetary issues. The government had to take debt to fulfill these and had come under huge debt. Privatization helped in lowering the government debt as well as the overall burden of the government.
- Improved Service
The quality of services provided to the consumers improved as a result of the shift to the private sector. In order to build their reputation and make a foothold in the market, the private owners provide good sales as well as after-sales service to the customers.
- Change in Pricing
The prices of certain goods and services have increased owing to privatization. The consumers are suffering a great deal because of the price rise especially in sectors where the private owners have a monopoly. However, in certain sectors, the competition has led to a fall in the prices of certain commodities and services.
The decision of privatization of various sectors had been taken to lower the burden of the government and it has been successful in doing so. However, for the general public, the impact of privatization has been both negative as well as positive.