Assertion (A): The government sells its shares in several public sector companies as part of the process of disinvestment. Reason (R): Many government workers are scared that they will lose their job after disinvestment.
Assertion (A): The government sells its shares in several public sector companies as part of the process of disinvestment. Reason (R): Many government workers are scared that they will lose their job after disinvestment.
Options
The correct option is (B): Both A and R are true, but R is not the correct explanation of A.
Why: It is true that under liberalisation the government has disinvested (sold shares in) public sector undertakings, and it is also true that this has caused genuine job-insecurity fears among government workers. But workers' fear is a consequence/reaction to disinvestment, not the reason the government undertakes disinvestment. The government disinvests for reasons like raising revenue, reducing fiscal deficit, and improving efficiency — not because of worker anxiety.
Marking Scheme
- 11 mark for correctly selecting option (B).
Hint
Ask whether R is a CAUSE of disinvestment or an EFFECT of it — effects can never be the 'correct explanation'.
Quick Oral Answer
Disinvestment and worker job-insecurity are both real, but the fear of job loss is a result of disinvestment, not the government's reason for doing it — so the correct answer is (B).
Analysis & Explanation
This question tests the ability to distinguish a cause from a consequence dressed up as a 'reason'.
Concept: Since the economic reforms of 1991, the Indian state has pursued liberalisation, privatisation and globalisation (LPG). Disinvestment — the government selling part or all of its equity stake in public sector undertakings (PSUs) — is one strand of this policy, driven by the goals of reducing the fiscal burden, mobilising resources and exposing PSUs to market discipline.
Why R fails as an explanation: R describes an effect of disinvestment on workers' psychology (fear of job loss), which occurs after or because of the policy — it cannot be the cause of the government's decision to disinvest. A valid Reason would instead cite fiscal deficit reduction, inefficiency of PSUs, or global market pressures.
Exam trap: Students often pick (A) because both statements 'feel connected' to the same topic, without checking the direction of causality — R must explain WHY A happens, not merely be a related fact.
Common Mistakes
- 1Selecting (A), mistaking a consequence (workers' fear) for the cause of the government's policy decision.
- 2Assuming disinvestment is only about job losses rather than broader fiscal and efficiency goals.
- 3Not recognising that both statements can be true while one still fails to 'explain' the other.
Interesting Facts
India set up a separate Department of Disinvestment (later Department of Investment and Public Asset Management, DIPAM) in 1999 specifically to manage the sale of government stakes in PSUs.
Major PSU disinvestments after 1991 included companies like BALCO, Maruti Udyog and, more recently, Air India (2021), reflecting the shift from state-led to market-led industrial growth.
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Frequently Asked Questions
Why does the Indian government disinvest in public sector companies?
The government disinvests mainly to raise non-tax revenue, reduce the fiscal deficit, cut the burden of loss-making PSUs, and expose these enterprises to market competition and efficiency, as part of the broader liberalisation policy since 1991.
Is workers' fear of job loss the cause of disinvestment?
No, it is a social consequence of disinvestment, not its cause. The decision to disinvest is driven by fiscal and economic policy goals, while worker insecurity is one of the social costs that follows from it.