Privatisation & globalisation in India: from lpg reforms to strategic disinvestment & 'Glocal' Policy

Introduction: The Shifting Sands of Economic Policy

Since the landmark Liberalisation, Privatisation, and Globalisation (LPG) reforms of 1991, India’s economic philosophy has undergone a profound transformation. The initial impulse was to dismantle the ‘Licence Raj’ and open a closed economy. Today, these concepts have evolved into sophisticated, multi-pronged strategies. Privatisation is no longer just about selling shares; it’s a tool for strategic realignment. Globalisation is not a blind embrace of the world economy but a carefully calibrated dance between global integration and national self-reliance. This article delves into the modern avatars of these two pillars of economic policy, focusing on the latest developments crucial for the UPSC exam.

Privatisation in India: A New Strategic Chapter

Privatisation, in its essence, refers to the transfer of ownership and/or management of a public enterprise to the private sector. It exists on a spectrum, from minority share sales to a complete transfer of control.

Historically, the government’s approach was termed Disinvestment—the simple act of selling a portion of its equity in Central Public Sector Enterprises (CPSEs), often to meet fiscal deficit targets. However, the contemporary focus, driven by the Department of Investment and Public Asset Management (DIPAM), has decisively shifted to Strategic Disinvestment.

Analogy for Understanding: Think of the Government of India as a large holding company with a diverse portfolio of businesses (PSUs). In the past, it sold small shares in many companies to pay its bills (Disinvestment). Now, it’s acting like a strategic investor, deciding to completely exit non-core businesses (privatisation of non-strategic PSUs) to focus its capital and attention on areas of national importance (strategic sectors).

The New Public Sector Enterprise (PSE) Policy

At the heart of this new approach is the New PSE Policy for Atmanirbhar Bharat (2021), which classifies the public sector into ‘Strategic’ and ‘Non-Strategic’ categories.

• Strategic Sectors: The government will maintain a ‘bare minimum’ presence. These are critical areas like Atomic Energy, Space & Defence; Transport & Telecommunications; Power, Petroleum, Coal & other minerals; and Banking, Insurance & financial services.
• Non-Strategic Sectors: All CPSEs in this category will be considered for privatisation or closure.

Mnemonic for Strategic Sectors: A simple way to remember the four broad strategic sectors is the acronym “A-T-P-B”:

• Atomic, Space & Defence
• Transport & Telecom
• Power & Petroleum
• Banking & Financial Services

Distinguishing Forms of Disinvestment

It’s crucial to understand the nuances between different approaches to managing public assets.

Recent Developments (2024-2025):

• Shift from Targets to Value Creation: Since FY24, the government has moved away from setting rigid annual disinvestment targets, focusing instead on a holistic “value creation” approach for PSEs. This includes enhancing their performance and selling stakes when market conditions are optimal.
• Revised DIPAM Guidelines (November 2024): DIPAM issued updated guidelines on capital restructuring for CPSEs. Key changes include mandating a minimum annual dividend payment of 30% of Profit After Tax (PAT) or 4% of net worth, whichever is higher, impacting how CPSEs manage their finances and deliver returns to the government.
• National Monetisation Pipeline (NMP): Launched in 2021 with a target to monetise assets worth ₹6 lakh crore by FY25, the NMP has made significant progress. As of June 2024, about ₹3.85 lakh crore had been raised. For FY25, the target was raised to ₹1.9 trillion. It’s vital to note NMP is not privatisation; the government retains ownership of the assets.

Globalisation: The Age of ‘Glocalisation’ and Strategic Trade

Globalisation is the increasing integration of economies through the movement of goods, services, capital, and labor across borders. Post-1991, India joined this wave, culminating in its membership of the World Trade Organization (WTO).

However, the classic definition of a borderless world is now being challenged by protectionism, supply chain disruptions, and a renewed focus on national interests. India’s current policy reflects this new reality, a blend of global ambition and a local focus often termed ‘Glocalisation’.

Statistic: India’s Foreign Trade Policy (FTP) 2023 sets an ambitious target of achieving US$2 trillion in exports by 2030, signaling a clear intent to deepen global trade engagement.

Balancing Atmanirbhar Bharat with Global Integration

The Atmanirbhar Bharat Abhiyan (Self-Reliant India Mission) is not about isolationism. It is a strategic pivot to enhance domestic manufacturing capabilities, reduce import dependence in critical sectors, and integrate India into global supply chains from a position of strength. Key instruments include:

• Production Linked Incentive (PLI) Schemes: These schemes incentivize domestic manufacturing in strategic sectors (e.g., electronics, pharmaceuticals, automobiles) for both domestic consumption and export.
• Strategic Bilateralism (FTAs): Instead of relying solely on the slow-moving multilateralism of the WTO, India is actively pursuing Free Trade Agreements (FTAs).

Recent Developments (2024-2025):

• WTO Ministerial Conference (MC13, Feb 2024): India took a firm stand to protect its interests, particularly regarding public stockholding for food security (protecting its MSP programs) and subsidies for fishermen. It also opposed linking non-trade issues like environment and labor to trade negotiations.
• New FTAs: India has been active on the trade diplomacy front. An FTA with the EFTA bloc (Switzerland, Iceland, Norway, Liechtenstein) was finalized in March 2024 and is set to be implemented from October 2025. A landmark FTA with the UK was also signed in mid-2025.
• Foreign Trade Policy (FTP) 2023: This policy, which continues to guide trade in 2024-25, emphasizes a shift from incentives to remission-based schemes, export promotion through collaboration (e.g., District as Export Hubs), and focusing on emerging areas like e-commerce.

Fun Fact: The world’s first-ever Free Trade Agreement was the Cobden-Chevalier Treaty signed between the United Kingdom and France in 1860, which dramatically reduced tariffs on key goods between the two nations.

Critical Policy Appraisal

Analytical Lens: UPSC Focus (Mains & Prelims)

Conceptual Basis:

• Constitutional Articles: The economic policies of privatisation and globalisation are guided by the Directive Principles of State Policy (DPSP), particularly Article 38 (promote the welfare of the people) and Article 39 (ensuring resources are distributed for the common good). The Union’s power to enter into international agreements like the WTO is derived from Article 253.
• Key Act/Legislation: The establishment of the World Trade Organization via the Marrakesh Agreement (1994) is the foundational legal basis for India’s multilateral trade obligations.
• Nodal Agency: The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the key agency overseeing disinvestment and public asset management in India.

UPSC Integration: Connecting the Dots

1. Polity (GS Paper 2): The debate on privatisation touches upon the changing role of the state—from a provider of services to a facilitator and regulator. It connects with topics of governance, accountability, and the welfare state.
2. Economy (GS Paper 3): This is a core topic, linking directly to fiscal policy (managing the fiscal deficit), industrial policy, infrastructure, and investment models. The success of disinvestment impacts the government’s ability to undertake capital expenditure.
3. International Relations (GS Paper 2): Globalisation strategy, FTA negotiations, and India’s stance at the WTO are central to its foreign policy and its relationship with major powers and trading blocs.

Future Impact & Policy Relevance:

The twin trends of strategic disinvestment and calibrated globalisation are set to define India’s economic trajectory. The long-term vision is to create a leaner, more efficient state focused on governance and strategic imperatives, while a competitive private sector drives growth. The key challenge lies in balancing economic efficiency with social equity. Success will depend on creating robust regulatory frameworks to prevent private monopolies and ensuring a just transition for workers affected by privatisation. On the global front, navigating the complex geopolitics of trade will be crucial to achieving the goal of becoming a $5 trillion economy.

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Prelims Practice Question (MCQ):

With reference to the New Public Sector Enterprise (PSE) Policy for Atmanirbhar Bharat, which of the following sectors are classified as ‘Strategic Sectors’?

1. Atomic Energy, Space and Defence
2. Pharmaceuticals and Textiles
3. Transport and Telecommunications
4. Power, Petroleum, Coal and other minerals
5. Banking, Insurance and financial services

Select the correct answer using the code given below: (a) 1, 2, 3 and 4 only (b) 1, 3, 4 and 5 only (c) 2 and 5 only (d) 1, 2, 3, 4 and 5

Answer: (b) Explanation: The New PSE Policy identifies four broad strategic sectors. Pharmaceuticals and Textiles are not on this list; they are considered non-strategic sectors where the government aims for privatisation or closure of its enterprises. The strategic sectors are (1) Atomic Energy, Space and Defence; (3) Transport and Telecommunications; (4) Power, Petroleum, Coal and other minerals; and (5) Banking, Insurance and financial services.

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Mains Sample Question (15 Marks):

“India’s approach to privatisation has matured from being a mere revenue-raising exercise to a strategic tool for enhancing efficiency and promoting growth.” Critically analyze this statement in the context of the government’s recent disinvestment and asset monetisation policies.

Mind Map Outline (Revision Structure)

• Privatisation & Globalisation: India’s Evolving Policy
  • I. Privatisation
    • A. Core Concept: Transfer of ownership/management from public to private sector.
    • B. Evolution in India
      • Pre-1991: State-led model.
      • Post-1991 (LPG Reforms): Disinvestment for fiscal consolidation.
      • Current Phase: Strategic Disinvestment
        • Focus on efficiency and value creation, not just revenue.
        • Role of DIPAM.
    • C. New Public Sector Enterprise (PSE) Policy (2021)
      • Classification of Sectors
        • Strategic: Bare minimum presence (A-T-P-B Mnemonic).
        • Non-Strategic: Privatisation or closure.
      • Recent Developments (2024-2025)
        • Revised DIPAM guidelines on dividends (Nov 2024).
        • Shift from annual targets.
    • D. National Monetisation Pipeline (NMP)
      • Concept: Leasing brownfield assets, ownership retained by govt.
      • Progress: ~₹3.85 lakh crore raised by June 2024.
  • II. Globalisation
    • A. Core Concept: Economic integration via cross-border flows.
    • B. India’s Journey
      • Post-1991: Opening up the economy, joining WTO.
      • Current Phase: ‘Glocalisation’ & Strategic Trade
        • Balancing global integration with self-reliance.
    • C. Key Modern Policies
      • Atmanirbhar Bharat: Not isolationism, but building capacity.
        • Production Linked Incentive (PLI) Schemes.
      • Foreign Trade Policy (FTP) 2023: Targeting $2T exports by 2030.
    • D. Recent Developments (2024-2025)
      • WTO Stance (MC13): Protecting food security and fishermen subsidies.
      • FTA Push: EFTA agreement (2024), UK agreement (2025).
  • III. Critical Analysis & UPSC Focus
    • A. Policy Appraisal
      • Privatisation: Efficiency vs. Equity debate.
      • Globalisation: Opportunity vs. Vulnerability.
    • B. Constitutional & Legal Basis
      • DPSP (Art 38, 39), Article 253.
      • WTO’s Marrakesh Agreement.
    • C. Inter-Topic Linkages
      • Polity: Role of the State.
      • Economy: Fiscal Policy, Industrial Growth.
      • IR: Trade Diplomacy.