After 1991, the government used two routes to improve public sector enterprises (PSEs): granting them maharatna, navratna or miniratna status, and privatisation. Which option correctly gives what each route did or was expected to do?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Granting status: more autonomy in taking managerial decisions; Privatisation: expected to give a strong impetus to the inflow of FDI
The two routes did different jobs. Special status gave PSUs autonomy in managerial decisions, while privatisation was expected to bring in more foreign direct investment (FDI).
Option (1) Granting status: more autonomy in taking managerial decisions; Privatisation: expected to give a strong impetus to the inflow of FDI — Correct. Both halves fit: status brought autonomy, and privatisation was expected to give impetus to FDI.
Option (2) Granting status: sale of part of the equity to the public; Privatisation: more autonomy in taking managerial decisions — Incorrect. Selling part of the equity to the public is disinvestment, a form of privatisation, not the status route. Autonomy came with the status.
Option (3) Granting status: expected to give a strong impetus to the inflow of FDI; Privatisation: more autonomy in taking managerial decisions — Incorrect. The two effects are swapped between the routes.
Option (4) Granting status: sale of part of the equity to the public; Privatisation: expected to give a strong impetus to the inflow of FDI — Incorrect. The privatisation half is right, but the status route gave autonomy, not a sale of equity.
NCERT (2026-27): “3.4 Privatisation The government envisaged that privatisation could provide strong impetus to the inflow of FDI. The government has also made attempts to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions. For instance, some PSUs have been granted special status as maharatnas, navratnas and miniratnas (see Box 3.1).” “3.4 Privatisation … Privatisation of the public sector enterprises by selling off part of the equity of PSEs to the public is known as disinvestment. …” |