Is Privatization Good for the Indian Economy?

Selloffs of Indian airports to Adani industries in 2020 sparked debates over crony capitalism and privatization itself. This post seeks to point out the negative effects of privatization.

  1. Abuse of the public interest:

It may be harmful to the public interest to privatize as in private sectors like public transport, healthcare, education, etc., profits might prioritized over the interests of the general public.

2. Natural Monopoly:

Privatizing state owned businesses concentrates power in the hands of a small number of private firms which may lead to monopolization, which may lead to exploitation of consumers.

3. Cuts in the essential services:

If a government- owned company which provided an essential service (example- water supply) to the citizens is privatized, its new owner/ owners could abandon the company’s social obligation to those who don’t have the ability to pay as much, or to regions where this service is unprofitable, in favor of maximizing profits.

4. Unemployment:

Due to the financial burden placed on the privatized companies to succeed without government assistance, unlike the generalized public- owned companies, jobs might be cut to maximize profits.

Overall, privatization has significant disadvantages that can’t be ignored. However, it also has numerous advantages such as increased efficiency, greater degree of transparency and accountability, and independence in decision making and management. It is not simple to assess if privatization’s benefits outweigh its costs. Its impact varies from industry to industry, community to community, and company to company.