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Understanding Fiscal Deficit: Definition, Causes, and Effects

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Definition: Disinvestment is the opposite of investment. When a government sells its share in a venture, it’s called disinvestment.

When you invest in an enterprise, you typically buy a share in it. Disinvestment is the opposite of it. The term disinvestment is typically used in the context of a government. When a government sells its share in a venture, it’s known as disinvestment. A government sells its share in a venture to raise money and to bring a private investor into that venture. In India, the government has sold its stake in ventures many times. It is believed that a government’s primary function is not to run a business. Hence, when a government runs a business, inefficiencies creep in due to bureaucracy and other issues. Businesses are mostly run for profit; however, a government’s objective is often not just to make a profit. Therefore, when a government is not able to run a venture well, it sells it to a private investor. This is called the process of disinvestment.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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