Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)? 1) The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt. 2) The Government no longer intends to retain the management control of the CPSEs. Which of the statements given above is/ are correct?

The answer is D, neither statement is correct. Disinvestment means selling part of the government's equity in a CPSE, and the proceeds go to the Consolidated Fund of India. They are used for general budgetary needs, mainly to reduce the fiscal deficit. Nothing ties them to repaying external debt, so statement 1 is wrong.

Statement 2 is also wrong. Most disinvestment has been a sale of minority stakes, and the government usually keeps majority ownership and management control. Even in strategic disinvestment, control passes only in specific, deliberate cases. The stated policy is 'minimum government, maximum governance', which means improving efficiency and transparency, not walking away from management.

The core concept is the difference between disinvestment and privatisation. Disinvestment is a fiscal and governance tool, and the Mains angle is whether it should be used mainly for revenue or for reforming public enterprises. The department handling it was renamed DIPAM (Department of Investment and Public Asset Management) in 2016, so the official nomenclature has changed since 2011.

Trap: Aspirants often equate disinvestment with privatisation and assume the government gives up control, or assume proceeds are earmarked for debt repayment. Check what the proceeds are used for before you accept either claim.