Notes on the Privatization of Insurance Industry


Notes on the Privatization of Insurance Industry

Public Enterprises in any country cannot perform all the economic and business activities efficiently. Even in a socialist country, public enterprises in all the fields cannot discharge their full responsibilities.

Complete governmentalisation or nationalisation will lead towards serfdom or anarchism. In absence of free will personal interests; the economic activities will not provide adequate and qualitative production.


This is the reason that some troubles have started in some parts of the USSR and China. In Indian conditions where we have adopted mixed economy, expecting too much from public enterprises will distort the economy and ultimately will lead towards wastage of precious resources.

Supporting and subsidizing by the Government indirectly punish the tax-payers and the country-men. Therefore, it is the high time to recast our Industrial Policy and should consider the productivity and efficiency as criteria to continue a particular unit whether public enterprises or private enterprises.

The public enterprises cannot be sustained as sacred cow without milk. Similarly, the unscrupulous private enterprises declaring themselves sick cannot be put on ambulance for a longer time. It is a matter of satisfaction that the Government has started taking pragmatic approaches to revive the productivity and efficiency base criteria for the development of an enterprise.

The restrictions on utilisation of full capacity by private enterprises are being removed gradually to increase production and productivity of the economy. The public enterprises will have to come at the combative of the private enterprises.


If the formers are losing in the efficiency and productivity criteria, they should be closed down and the private enterprises having more efficiency and productivity should be encouraged to increase production of the economy.

The industrial policy that public enterprises provide more employment opportunities although production is nominal should be changed to bring them under productivity criterion. Providing employment for the sake of employment is adding fuel to the fire of inflation any trend in the economy because the productivity is very low.

The Government decision to denationalise certain production undertaking is welcome step because they remain idle without production or very small production. Other political parties should realise the gravity of productivity and discard the public enterprises for the sake of political system.

The Government cannot perform all the functions with equal efficiency. The regulatory role, promotional role, entrepreneurial role and planning role have not been fully discharged by Government.


Barring few enterprises as envisaged in the Industrial Policy 1956, rest of the public enterprises should be returned back to the private institutions if their productivities are not improved to the level of a private enterprise.

The government should concentrate more on regulatory and planning roles. The entrepreneurial role should be confined only to those areas where the private entrepreneurs are hesitant and cannot discharge their functions satisfactorily at national level.

Non-profitable business activities, defense, transport, education, communication and such types of public activities should be undertaken by the Government. W. A. Levis observed: “The nationalisation of industry is not essential to planning; a government can do nearly anything it wants to do by way of controlling industry without resorting to nationalisation”.

Neither state monopoly nor private monopoly is desirable in the economy. The competition, being the backbone of the productivity should be encouraged to promote the economy.


The competition may be between and amongst the public and private enterprises. The productivity and efficiency are the important criteria to permit the continuation of an enterprise.

The public enterprises in some areas performed better than the private enterprises and, therefore, should be permitted to continue to accelerate the growth of the economy. On the other hand, many public enterprises are wasting public money because of continuous loss and less production.

Such enterprises should be handed over to the competent private companies. On the reverse, some private enterprises are at loss and declaring themselves sick. They should be taken over by the Government companies of the area or by the private houses as the circumstances and nature of the business may be prevailing at that time.

The privatisation may be done after analysing the efficiency of the organisation and their role in the economy. The problem of public enterprises, inefficiency of public enterprises and efficiency of private enterprises, are considered under privatisation and efficiency.

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