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?

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YESPYQ · Accepted Answer

Correct answer: Neither 1 nor 2. Central Public Sector Enterprises (CPSEs) en- com-passes those Government companies in which the direct holding of the Central Government is 51 per cent or more and subsidiaries of such Government companies. The Statutory Cor- porations set up under Statutes enacted by the Parliament and other companies owned or controlled, directly or indirectly by the Central Government are also categorized as CPSEs. Statement 1 is incorrect : External debt is the portion of a country’s debt that is borrowed from foreign lenders, including commercial banks, governments, or international financial insti- tutions. The primary objectives of disinvestment in CPSEs are to raise resources for development, reduce fiscal defi- cits, and promote wider ownership of CPSEs through public participation rather than repaying external debt. Statement 2 is incorrect : In many cases, the government re- tains management control by holding a majority stake (more than 50%) even after partial disinvestment. However, in stra- tegic disinvestments, management control may be transferred to

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