Bolder Disinvestment or Better Performance Contracts? Which Way Forward for India's State-Owned Enterprises

Ajay Chhibber and Swati Gupta ()
Additional contact information
Swati Gupta: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: This paper analyses the performance of India's Public Sector Undertakings (PSUs) us-ing measures of labour and overall efficiency and productivity indicators as opposed to finan-cial returns. Using methods that correct for selection bias, the results show that performance contracts do not improve firm efficiency but disinvestment has a very strong positive effect on firm efficiency. Disinvestment improves labour productivity and efficiency, which is not surprising, but it also improves overall efficiency. India should pursue much bolder privati-zation even of PSUs which claim to be making operational profits - such as Air India, because privatization improves overall firm efficiency and unlocks capital for use elsewhere, espe-cially in public infrastructure, and reduces the possibility of political interference in their functioning in future.

Keywords: Public Sector Undertakings; State Owned Enterprises; Public Sector Restructuring; MOU (performance contract); Disinvestment (privatization) (search for similar items in EconPapers)
JEL-codes: H11 L32 L33 (search for similar items in EconPapers)
Pages: 25
Date: 2017-08
New Economics Papers: this item is included in nep-eff
Note: Working Paper 205, 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.nipfp.org.in/media/medialibrary/2017/09/WP_2017_205.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:17/205

Access Statistics for this paper

More papers in Working Papers from National Institute of Public Finance and Policy
Bibliographic data for series maintained by S.Siva Chidambaram ( this e-mail address is bad, please contact ).