Managerial Economics

8 Major Causes of Wage Differentials (With Examples)

Last Modified: 11 February, 2020 2 Comments

Labour is a human factor of production and its all units are not identical because of differences in efficiency and productivity of labour.

There is a wide difference in the wages of workers and this variation differs from one occupation to another, one industry to another, one region to another and even from one country to another.

Causes of Wage Differentials

The causes of wage differentials are as follows:

1. Nature of Employment

Wage differentials may be on account of acceptance or non-acceptance of the employment.

People may accept a job with low remuneration with attractive working and living conditions while may not accept high Paid employment with bad living and working conditions and tiresome Jobs.

The nature of employment will affect wages.

2. Profitability of Success

Wage differentials are found with the profitability of success in employment.

Where the probability of success is uncertain, wages will be high while in case of an employee having risk and failures the wage rate will below.

3. Training and Education

A job with a low level of training and education will have low wage rates Higher Education and Training required high wages rates.

People generally accept the easy jobs rather than a difficult job despite the low wage rates.

4. Security and Stability of Employment

Secure and stable employment has low wage rates while temporary and seasonal employees will have High wage rate.

5. Geographical Differences

Wage differentials are on the basis of geographical differences based on Industrial and occupational differences.

In cities, wage rates are high while rural labour is available at low wage rates.

6. Market Imperfection

Wage Differentials are also found on account of imperfect market competition in the factor market.

Inertia, family attachment, language, religion, caste are the factors by which labour has Limited mobility from one region to another.

From one occupation to another. from one industry to another. On account of it, wage differentials are found.

7. Responsibility and Accountability of a Job

If a job presupposes responsibility and accountability the wage rate will be high while the wage rate will be low in those cases where responsibility and accountability are rare.

8. Strong and Organised Trade Union

Wage differentials are also found on account of the bargaining power of the trade union.

If the Trade union is well organized and strong the wage rates will be high in comparison to those organizations wherein the trade unions are weak and have weak bargaining power.

Thus, now you know the major causes of wage differentials in economics.

17 Role and Importance of Small Scale Industries (Economy)

Last Modified: 25 March, 2020 4 Comments

Small scale industries occupy an important place in the country’s economy. This faces many serious problems, most of which are associated with the smallness of their operations.

Role and Importance of Small Scale Industries

The Small-scale sector plays a vital role in the growth of the countries.

Following is the role and importance of small scale industries:

1. Employment Potential

Small-scale industries are labour intensive. A given amount of capital invested in small-scale industrial undertakings is likely to provide more employment.

At least in the short run, then the same amount of capital invested in large-scale undertakings.

The Encouragement of small-scale industries would serve to counteract the seasonal unemployment in agriculture and Thus to utilize labour which might otherwise go to waste.

These industries offer limitless opportunities for self-employment. It is these self-employed persons who are the backbone of the nation.

Every effort must be made to strengthen the position of these proud and self-reliant persons in the country’s economy.

2. Less Capital Requirement

Small-scale industries are the capital-light example they need a relatively smaller amount of capital than that required by large-scale industries.

Thus, one of the great advantages of small-scale industries is that they make possible economies in the use of capital.

As capital is very scarce in under-developed countries.

It may be used to Greater advantage in the early stages of development if it is used to expand transport and other public utilities, irrigation, and other agricultural requirements and those forms of large-scale industry where the advantages outstandingly great.

3. Latent Resources

Small-scale industries will fall into being capital that would not otherwise have come into existence.

The spreading of small-scale industries over the countryside would encourage the habits of thrift and investment in rural areas.

Moreover, the enterprising small manufacturer has to scrape together capital where the can find it.

He often manages to get it from relatives and friends.

This capital probably would never have come into existence is productive capital had it not been for the Small Enterprises.

4. Skill Light

Another attraction of small-scale industries lies in their being skill light a large scale industry calls for a great deal of Management and supervisory skill foremen, engineers, accountants, and so on. Like capital, these skills are also in very short supply in our country, and it is important to economies as much as possible in their use.

Small-scale industries provide a way of doing this and at the same time provide industrial experience and serve as a training ground for a large number of small-scale industries managers, at least some of whom develop the capacity for managing large-scale undertakings.

5. Use of Local Resources

Small-scale industries are importing light like they used a relatively low proportion of imported equipment and materials as compared with the total amount of capital used in them.

Large-scale industries, on the other hand, require huge imports in the form of equipment and materials, upsetting the country’s Balance of payments thereby.

A low import intensity in the capital structure of the small-scale industries reduces the need for foreign capital or foreign exchange earnings.

Thus, obviates Balance of payment difficulties later and currently retains within the country a large part of whatever induced effects may materialize.

6. Quick Production

Small-scale industries are the “quick investment type” like, those in which the time required between the investment of capital and the start of the flow of goods produced is relatively short.

In a developing economy with strong inflationary pressure and the need for a rapid rise in the living standards, the importance of such quick investment type Industries can hardly be exaggerated.

The anti-inflationary requirements and the requirements of development are often in conflict but a compromise can be found in the small-scale industries which have a high fruition coefficient and also a short fruition lag.

7. Decentralization

The development of small-scale industries will being about the decentralization of industries and will thus, promote the object of Balanced regional development.

A major drawback in the industrial structure of our country is that the regional distribution of industries is exceedingly uneven.

On the other hand, there is a disappropriate net growth of large-scale industries in a few areas.

8. Equitable Distribution

Small-scale industries and cottage industries have the additional advantage that small-scale industries they secure a more even distribution of income and wealth.

The development of large-scale industries tends to concentrate large income and wealth in a few hands, which is undesirable from the social point of view, in that they involve exploitation of Man by man.

They also create vested interest which puts obstacles in the way of the economy marching towards its goal of the socialistic pattern of society.

9. Mobility of Labour

By carrying the job to the worker, small-scale industries can overcome the difficulties of terrestrial immobility.

Moreover, unlike large Industries small-scale industries do not create problems of slum housing, health, and sanitation, etc. and the attendant disease, misery, and squalor.

10. Support of Large-Scale Industries

Another highly useful role of small-scale industries in developed and underdeveloped countries is the great support that the development of large-scale industries can obtain from small-scale industries.

This is possible in the following ways:

Small-scale industries may manufacturer small parts like cycle parts, which may letter be assembled by the large Industries.
The large-scale industry may produce semi-finished goods which may lead to being made into several types of finished goods in small-scale industries setups, such as agricultural implements and cutlery from iron and steel, household utensils from sheet metals.

11. Reduction of Dependence on Agriculture

The growth of Cottage and small-scale industries will divert surplus labour from our overburdened agriculture and thus bring about a more desirable occupational distribution.

12. Relieving Congestion in Urban Areas

By providing remunerative employment in the rural areas, these Industries will relieve congestion in overcrowded urban centers.

13. Sustaining Green Revolution

Small-scale industries can help sustain the green revolution in the countryside mainly through the development of agro-based industries and services, such as the production of farm implements and equipment for food processing industries and Agricultural Machinery repair and service workshops.

Besides, the expansion of rural income as a result of the green revolution is expected to boost the consumer demand for sophisticated items such as radios, TV sets, transistors, cycles, sewing machines and cosmetics, which the small-scale industries can conveniently meet.

14. Foreign Exchange Earnings

From the point of Balance of payments, small-scale industries are justified on two Grounds.

One, they do not require much foreign exchange resources for their establishment and to that extent place almost no extra burden on the balance of payment, position.

Two, small-scale industries can contribute to the foreign exchange Kitty of the country by adding to exports.

These industries are exporting traditional as well as non-traditional items.

15. Production of Consumer

Small-scale industries, predominantly producers of consumer goods, have a key place in the process of development.

The industrialization of the country, with emphasis on heavy industries, requires large capital investment, living little for large and consumer goods industries.

In the process of industrialization, when the income increases the demand for consumer goods also increases.

If the supply of consumer goods does not exist as it leads to price rise, which will thus not only lower the standard of living of the poor workers but will also jeopardize the very process of growth.

16. Political and Social Advantages

Small-scale industries can help in awakening the powerful dormant forces among masses for use in constructive activities.

The freedom of work, self-reliance, self-confidence, enthusiasm to achieve, and all such traits of a healthy Nation can be built around the material activities performed in these industries.

17. Preservation of Inherited Skill

Small-scale industries were helpful in the preservation of the inherited skill of our artisans which would otherwise languish and disappear.

A great many people in villages and small towns will be saved from the mechanical, monotonous and robot-like life associated with big industrial cities.

These non-economic factors cannot be concretized into cold statistics. In fact, these are the essence of life.

Conclusion

Thus, Small-scale industries have a crucial role to play in the economy:

Reducing the incidence of unemployment and underemployment.
Increasing National income.
In meeting the shortage of consumer goods.
In accelerating economic growth by making optimum use of natural and human resources.
In promoting balanced regional development.
In reducing inequalities in the distribution of income and wealth.
In relieving the present excessive pressure on land and overcrowding in urban areas, and in sustaining the Green Revolution.

Thus, now you know the role and importance of small scale industries in an economy.

13 Negative Effects of Globalization (With Examples)

Last Modified: 30 December, 2022 Leave a Comment

With respect to developing countries, globalization policy has both positive and negative aspects. Globalization leads to contraction or shortening of the world market.

Negative Effects of Globalization

The negative effects of globalization can be studied as follows:

1. Cut-throat Competition

Globalization gives birth to the cut-throat competition which results in the early closure of many Institutions.

This proves the negative effects of globalization on the business environment.

2. Removal of Protection

In every country, some of the industries are assisted by the government but due to this policy, all the assistance is provided by the government is removed.

negative effects of globalization, the new and underdeveloped countries have to face problems.

3. Hindrance in Establishment of Small and Cottage Industries

Globalization hinders the development of small and cottage industries that have to be coordinated with large Industries.

These have to be coordinated with large industries.

This will limit the personal independence of small and Cottage entrepreneurs.

4. Limited Field of Domestic Institution

Globalization has Limited the work of domestic Institutions.

This restricts their importance in the international field.

5. Expensive Imports

If a few countries exports Limited than imports become expensive.

6. Takeover of Business

Globalization has increased the tendency of the takeover of small Institutions by large Institutions or they have to merge in large Institutions for holding themselves.

7. Arousal of Monopoly

Globalization has given birth to large Institutions which results in spontaneous arousal of monopoly.

8. Ownership of Institutions

Globalization increases direct foreign investment in the country.

This results in the ownership of foreign Institutions over local resources.

This slowly gives rise to the establishment monopoly of foreign institutions in the country.

9. Expensive Domestic Goods

Globalization presents an open market for the domestic goods produced in a country.

As a result of domestic goods like vegetables, fruits, cereals, etc. are available for the whole world.

This will make these goods expensive in the country.

10. Effect of Priorities of Plans

There will be a deviation from plan priorities without considering the problems of the general public.

This can also affect the balanced economic development of the country.

11. Unemployment

The mechanization of industries increases the chances of unemployment.

But to cope up with this, special stress has two chances of unemployment but to cope up with this special stress to be laid down on rural development and development in the field of services.

12. Increase in Inequalities

On one hand, globalization stresses on single economy and market but on the other hand, It may increase inequalities and regionalism.

Thus, there are wider chances of increasing inequalities and differences among different nations.

13. Effect on National Sovereignty

Application of globalization makes All the Nations are business market. This can adversely affect national sovereignty.

Thus, globalization has both positive and negative aspects.

The country with efficient economic management will less negative aspects and more of a positive aspect.

Thus, now you know the negative effects of globalization.

28 Positive Effects of Globalization (With Examples)

Last Modified: 25 March, 2020 1 Comment

Globalization means integrating the economy of a country with the world economy. Globalization is a process of change resulting from a combination of increasing cross-border activity and the spread of Information Technology, facilitating real-time communication worldwide.

With respect to developing countries, globalization policy has both positive and negative aspects.

Globalization leads to contraction or shortening of the world market.

Now, every country in the world is adopting the policy of globalization.

The globalization of the economy has also resulted in the globalization of trade and business.

Positive Effects of Globalization

The following are the positive effects of globalization on different categories:

1. Expansion of Market

Globalization helps in the expansion of the market for trade and business.

The business Institutions are free to expand their business worldwide.

National boundaries become meaningless for the multinational companies as they get unrestricted power to exploit resources of the whole world economy.

2. Large Size

Globalization results in the expansion of business Institutions because their business area is not restricted to a nation only.

Thus, produce in huge quantities.

3. Free Determination of Production Capacity

Due to globalization business Institutions themselves cannot fix their production capacity.

It entirely depends on market power.

4. Indigenous Multinational Corporation

Globalization helps in the development of indigenous multinational companies/corporations along with multinational corporations.

Such kind of corporations is still establishing.

5. Development of Independent Money Market

Globalization has resulted in the development of an independent money market.

The exchange rate of money depends on market power on demand and supply power.

6. Technical Development

Globalization makes available technical knowledge worldwide.

This helps in the development of Technical research, discoveries and new techniques of Industrial Production.

7. Transfer of Business

Due to globalization, business Institutions acquire new field for business.

For example, during the Gulf War, Kuwait Bank had transferred its business to Bahrain and sent information through fax for continuing business.

8. Flow of Resources

Globalization Makes the process of flow of resources like labour, goods, capital, techniques information, etc. among different countries of the world.

9. Brand Development

A globalized economy favors the business of branded goods/items.

This is not only restricted to two durable goods are capital goods but also to normal drinks, cereals, clothes, etc. Or in other words, the market is full of brand equity.

Bonus: 11 Limitations or Disadvantages of Branding (Explained).

10. Development of Competitive Power

Globalization helps in increasing the competitive power of business institutions.

When the demand for products of a particular institution Rises, then the production is increased to fulfill demand and for this new resources and technologies are applied.

All this increased the competitive power of business.

11. Increasing Number of Plants

As a consequence of globalization, a business institution increases the number of products and plants.

Such plants are established at different places in accordance with the available conditions and resources.

12. Awareness of Business Environment

Globalization results in an increase in the number and complexity of components of the business environment.

The business institutions have to consider population, surroundings, cost of health care, diseases, drugs, weapon trade, minorities, etc.

13. Expanded Capital Market

Application of globalization policy, make available wider capital market to the business institution.

This helps in providing Loans at a low rate.

It will increase direct foreign investment (FDI) and Indigenous, companies will get a chance to issue share capital in the international capital market.

14. Efficiency Services

The facilities of Telecommunication, transport, bank, insurance has improved as a result of globalization only.

15. Better Industrial Relations

Globalization has resulted in an increase in industrial and labor mobility.

This provides a friendly environment in the relations between employer and employee.

16. Freedom of Business

Globalization has made the business institution free from foundations off-licenses, rules, and regulations, inspectors, bureaucracy, traffic, etc.

17. Development of Professional Management

Globalization has helped in the development of professional management in the country.

18. Promotion of Combinations

Due to globalization, many large and small trade Institutions of the country are combined together.

This will make sure the success of non-profitable Institutions by merging them with profitable Institutions. 28 Important Functions of Sales Promotion (With Examples).

19. Development of Infrastructure

Rapid development in infrastructure facilities like light and electricity, roads, railways, harbors, Airways, alternative Sources of Industrial power, telephone, etc.

All are the consequences of globalization policy.

20. Increase in Savings and Investment

Due to globalization, there will be an increase in employment opportunities and therefore earnings.

This will increase investment and saving habits and this further increases the rate of capital formation in the country.

21. Balance of Payment

Globalization maintains the equilibrium of Balance of payments.

It can be a possibility only to balance all types of imports and exports.

22. Huge Investment in Social Sector

The social aspects like education, Health, Family, Welfare, etc. have gained the possibilities of Huge investments.

23. Increase in Employment Opportunities

Yet, direct employment opportunities have been reduced due to globalization, but there is an increase in indirect employment opportunities in the field of services.

There is an increase in employment opportunities in small and cottage industries.

It also increases the chances of self-employment.

24. Increase in Mutual Cooperation

Globalization policy has increased cooperation among employees, employers, investors, and government.

25. Remedies to Social Problems

Social problems like poverty unemployment, diseases, illiteracy, etc. can be eradicated by applying globalization policy.

26. Removal of National Boundaries

Globalization has resulted in the merging of national boundaries with the whole world economy.

27. International Cooperation

The combination of a country’s economy with the world’s economy gains International cooperation.

28. Raised Social Status

Globalization has increased the living standard of people.

It has made the life luxurious and of a high standard by providing facilities for standard goods, medicines, education, entertainment, etc.

Thus, now you know the positive effects of globalization on the economy.

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22 Advantages and Disadvantages of Privatization in Economy

Last Modified: 3 February, 2021 23 Comments

Privatization is a process in which the private sector is involved in the ownership and management of the public sector or transfer of ownership and management in the private sector and economic democracy is been established by reducing government control in economic activities.

What are the pros and cons of privatization?

Privatization benefits society in several ways.

The fact that privatization and an important strategy of economic rejuvenation of even the communist nations is a testimony to the economic role of privatization.

Advantages of Privatization

The arguments or benefits of privatization maybe be as:

1. Financial Resources

The main advantage of privatization is to generate financial resources for the government to generate resources disinvestment of public sector enterprises.

2. Optimum Utilisation of Resources

It has been observed that the public sector has failed in the optimal use of national resources.

The private sector may succeed in the optimum use of resources by maintaining efficiency.

3. Fostering Competition

Most of the public enterprises enjoy the status of monopoly.

It results in inefficiency and losses.

Privatization creates a situation of competition for public enterprises and they are forced to improve their efficiency.

4. Reduce Fiscal Burden

Privatization reduces the fiscal burden of the state by relieving it of the losses of the public enterprise and reducing the size of the bureaucracy.

5. Economic Democracy

Privatization helps to control government Monopoly.

It helps to attract more resources from the private sector.

It emerges from economic democracy by private participation in the economic sphere.

6. Better Industrial Relations

Privatization may increase the number of workers and the common man who are shareholders.

This could make the enterprises subject to more public vigilance.

7. Reduction in Political Interferences

The process of privatization reduces political interferences in the public sector enterprises by giving more representation to the private sector in the management of Public Enterprises.

8. Reduction in Bureaucracy

Public Enterprises become a synonymous bureaucracy.

They can be made from bureaucracy by the process of privatization.

9. More Productivity

The private sector can improve productivity by maintaining efficiency in its operations.

merits of privatisation — merits of privatization

10. Economical

The process of privatization maintains the economy in the operations, whereas the operations of public Enterprises are costly.

11. Individual Motivation

The success of the private sector resides in the profit motive.

Privatization motivates the managers to make efficient in the operations of the enterprise so that I can earn more and more profits.

Disadvantages of Privatization

Following are the limitations of privatization:

1. Problem of Price

The government usually want to sell the least profitable enterprises, those that the private sector is not willing to buy at a price acceptable to the government.

2. Opposition from Employees

Disinvestment tends to arise political opposition from employees who may lose their jobs, from politicians who fear short-term unemployment consequence of liquidation of cost reduction by private owners, from bureaucrats who stand to lose patronage, and from those sections of the public who fear that national assets are being concerned by foreigners, the rich or a particular ethnic group.

3. Problem of Finance

In the developing countries under the developed capital market sometimes makes it difficult for the government to float shares and for individual buyers to finance the large purchase.

4. Improper Working

The main disadvantage of the private sector is that it has fallen much short of what this sector is capable of or what it has achieved in some other countries.

The private sector is not interested in cost reduction and quality production.

There are again many unfair practices in which many businesses indulge in often resulting in the generation of black money and corruption.

There is a little flowering of genuine entrepreneurship which can innovate and dare into new products and new processes.

5. Interdependence on Government

There has been excessive Regulation and control of the private sector by the government.

This has prevented and competition from becoming a generalized phenomenon of the economy.

The private sector has also become too much dependent on the government for meeting its imports requirement, output sale, finances, etc.

This has sniffled the capacity of the private sector to stand on its own.

6. High-Cost Economy

Another problem with the private sector is that its cost, in general, are large and the price of products are unduly high.

Barring a small proportion of companies that are efficient and show a good profitability ratio, many are insufficient.

The cost of production in large part because of the poor technology and partly because of the poor management.

The two other factors of higher costs are the high costs of raw materials and components and the higher rate of indirect taxes

7. Concentration of Economic Power

The private sector emerges a monopoly and the concentration of economic power in the hands of few.

The dominance of some business groups in terms of capital and assets is an economic and social problem.

The private sector operates on the principle of maximization of the Monopoly profits.

It is harmful to consumers and society as a whole.

8. Bad Industrial Relations

An unfortunate aspect of the private sector is the recurrence of industrial disputes which hamper the smooth progress of the industries.

For several years, there have been larger than in the public sector.

The harmful consequences are obvious work stoppages leading to the nation’s utilization of capital equipment, idle labor, wastage of Manpower, loss of production, law and order problems, etc.

9. Widespread Sickness

The private sector industries such as Textiles, Engineering, Chemicals, iron, and steel and people are suffering from the problems of industrial sickness.

These industries are facing continuous losses.

It adversely affects the industrial environment.

10. No Guarantee of Success

Privatization is not a guarantee of the success of an individual unit.

It has been observed that many private sector units make huge losses.

11. Ambulance Development

Private sector units are influenced in those areas which are most suitable for-profit purpose.

It results in the concentration of individual units in a few areas.

Thus, privatization will be harmful to balance economic development.

Conclusion

It is important to realize that privatization is not a panacea for the ills of is of the public sector.

In countries where the market functions poorly and enterprises are still vulnerable to arbitrary government edicts, transferring ownership to the private sector is unlikely to achieve much.

It merely transfers the ownership of rents from the public to the private sector.

Similarly, creating private monopolies without an effective system of monitoring and controls opens up the danger of exploitation of consumers.

Indeed, changing the culture by providing adequate training for new entrepreneurs, for example, or ensuring a competitive environment is probably more significant than changing ownership.

And if the enterprise is still a monopoly after privatization, as is often the case with utilities, it must be subject to suitable controls, otherwise, inefficiencies and Monopoly power will merely be transferred to the private sector, with the costs being borne by consumers or monopolistic exploitation by efficient private owners replaces the inefficiency of public ownership.

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Privatization: Meaning, Features, Scope, Objectives (Explained)

Last Modified: 25 March, 2020 7 Comments

Privatization means the transfer of ownership or management of an enterprise from the public sector to the private sector. Privatization is a process in which government dominance is reduced in all economic activities.

Privatization: Features Scope Objectives — Privatization: Meaning, Features, Scope, Objectives

The term privatization refers to any shift in activity from the public to the private sector.

They could involve merely the introduction of private capital or management enterprise into a public sector activity.

But more typically, it involves the transfer of ownership of public enterprises to the private sector.

Thus, Privatization is a process in which the private sector is involved in the ownership and management of the public sector or transfer of ownership and management in the private sector and economic democracy is been established by reducing government control in economic activities.

Features of Privatization

Following are the basic features of privatization in points:

1. New Concept

Privatization is a new concept that has emerged in the last two decades.

2. Universal Concept

The concept of privatization has emerged not only in India but it has developed all over the world. Countries like USA, UK, Japan, India, etc. Has adopted this ideology.

3. Wide Concept

It is a wise idea. It involves not only the transfer of the public sector to private hands but it limits government involvement in the economic activities and protects the private sector.

Thus, it involves a large number of activities such as reduce government shares then the economic sector the expansion of the private sector.

4. Economic Democracy

It is a means of establishing economic democracy.

It provides the chance to the private sector to operate in economic activities freely.

5. Process

Privatization is a process which goes on continuously.

It cannot be completed in a certain period. It is a process that takes its shape slowly.

6. Private Sector in Place of Public Sector

The private sector is being developed in place of the public sector in the process of privatization.

7. Reduction in State Dominance

It is a process in which state dominance is reduced in the economic sphere.

8. Assumption

The privatization is based on the assumption that the private sector is more efficient in the management and control of an enterprise than the public sector.

9. New Strategy

It is a new strategy to face the challenges emerged in the economic sphere recently.

In the process of privatization, the private sector takes the task of economic development of the country.

10. Wide Area

Privatization is a wide concept.

It involves various activities such as denationalization, decontrol, deregulation, economic liberalization.

Scope of Privatization

Privatization covers the different type of measures and techniques as discussed below:

1. Ownership Measures

The set of measures that transfer ownership of public Enterprises, fully or partially, lead to privatization.

The higher the proportion of transfer of ownership to the individual Cooperative or corporate sector, The greater is the degree of privatization.

This can be taken in three forms:

(1). Total Denationalisation

It implies a complete transfer of ownership of a public Enterprise in the private hands.

(2). Joint Venture

It implies the partial introduction of private ownership.

The range of private ownership depends upon the nature of the enterprise and government policy in this regard.

(3). Liquidation

It implies the sale of assets to someone who may use them for the same purpose or some other purpose depending upon the preference of the buyer.

Privatization Reports

(4). Management Buyout

It is a special version of denationalization. It implies the sale of assets to the Employees.

For this purpose, appropriate provision of loans from the banks, it also made to enable employees to take over ownership.

The employees may form a Cooperative to run the Enterprise.

2. Organizational Measure

Following are the organizational measure to Limit state control:

(1). Holding Company

A holding company structure may be changed in such a way that the government limits its control intervention to Apex level decisions and leaves the operating companies within the arrangement to a sufficient degree of autonomy in decision-making within the framework of market forces.

(2). Leasing

A public enterprise while retaining Ownership may lease out to a private bidder for a specific period for use.

The government ensures the right of obtaining profits as per our agreement, on the other hand, tenure ownership is expected to lead to improve efficiency or lower the cost of operation.

(3). Restructuring

To being public sector enterprises under market discipline, it would be desirable to go in for two forms of restructuring:

Financial restructuring can be affected in the sense that accumulated losses are written off and capital composition is rationalized in respect of debt-equity ratio.
The basic restructuring may be affected by redefining the set of commercial activities which the enterprise will undertake henceforth.

3. Operational Measures

These measures are intended to improve the efficiency of the organization, even when full denationalization has not been undertaken.

They, in fact, inject the spirit of commercialization in public Enterprises.

The measures include grant of autonomy to public enterprises in decision-making, for the provision of incentives to blue-collar as well as White-Collar employees consistent with increasing efficiency or productivity, freedom to acquire certain inputs from the market by a system of “Constructing” instead of producing them within the enterprise, development of proper investment criteria, etc.

Bonus: 15 Essential Elements of Creativity in Entrepreneurship.

Objectives of Privatization

It has been observed that the public sector has failed in the optimal use of national resources.

The private sector may succeed in the optimum use of resources by maintaining efficiency.

Following objectives has been observed behind the process of privatization in the world:

To improve the operational efficiency of Public Enterprises.
To develop competitive efficiency in the industries.
To generate resources for a deficit budget.
For the globalization of domestic Industries.
To invite foreign capital.
To earn foreign currency through export promotion.
To exploit the natural resources of the country with efficiency
To emerge wide public ownership on the economic resources of the company country.
To create an environment for rapid industrialization.
Accord priority to the Welfare activities by the government.
To operate public enterprise on commercial basis.
To free the government from The Loss-making Enterprises.
To protect the industrial peace.
Privatization: Features Scope Objectives.