Question

The sale or liquidation of assets by the government, usually Central and State public sector enterprises, projects, or other fixed assets is called ______.

1. Devaluation
2. Capitalisation
3. Disinvestment
4. Privatisation

Answer 1

Correct Answer - Option 3 : Disinvestment

The correct answer is Disinvestment.

• The sale or liquidation of assets by the government, usually Central and State public sector enterprises, projects, or other fixed assets is called Disinvestment.

• Devaluation of a currency
  • Devaluation of a currency is associated with countries having a fixed exchange rate regime.
  • Under the fixed-rate regime, the central bank or the government decides the value of the currency with respect to other foreign currencies.
  • The central bank or the government purchases or sells its currencies to maintain the exchange rate.
  • When the government or the central bank reduces the value of its currency, then it is known as the devaluation of the currency.
  • Under this, the value of the domestic currency is deliberately reduced in terms of other foreign currencies.
•  Market capitalization 
  • Market capitalization is the aggregate valuation of the company based on its current share price and the total number of outstanding stocks.
  • It is calculated by multiplying the current market price of the company's share with the total outstanding shares of the company.
• Disinvestment
  • Disinvestment means the sale or liquidation of assets by the government, usually Central and state public sector enterprises, projects, or other fixed assets.
  • The government undertakes disinvestment to reduce the fiscal burden on the exchequer, or to raise money for meeting specific needs, such as to bridge the revenue shortfall from other regular sources.
  • Strategic disinvestment is the transfer of the ownership and control of a public sector entity to some other entity (mostly to a private sector entity).
  • Unlike simple disinvestment, strategic sale implies a kind of privatization.
  • The disinvestment commission defines strategic sale as the sale of a substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of up to 50%, or such a higher percentage as the competent authority may determine, along with transfer of management control.
  • The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal department for the strategic stake sale in the Public Sector Undertakings (PSUs).
• Privatization
  • Privatization can mean different things including moving something from the public sector into the private sector.
  • It is also sometimes used as deregulation when a heavily regulated private company or industry becomes less regulated.