Privatization involves selling state-owned assets to the private sector. However, critics argue private firms can exploit their monopoly power and ignore wider social costs.

Privatization is often achieved through listing the new private company on the stock market.

Microeconomic advantages:

1) State owned enterprises generally are outdone by the private enterprises competitively. When compared the latter, it shows better results in terms of profits and efficiency and productivity. Therefore, privatization can provide the necessary push to the underperforming PSUs.

2) Privatization brings about fundamental structural changes providing momentum in the competitive sectors.

3) Privatization leads to implementation of the global best practices along with management and motivation of the best human talent to foster sustainable competitive advantage and improvised management of resources.

Macroeconomic advantages:

1) Privatization has a positive impact on the financial growth of the sector which was previously state dominated by way of decreasing the deficits and debts.

2) The net transfer to the State-owned Enterprises is lowered through privatization.

3) It helps in escalating the performance benchmarks of the industry in general.

4) It can initially have an undesirable impact on the employees but progressively in the long term, shall prove advantageous for the growth and prosperity of the employees.

5) Privatized enterprises provide better and quick services to the clients and help in improving the overall infrastructure of the country.

Few more advantages:

1. Better Incentives:

Private-sector industries provide incentives that are known to be better than the ones provided by Government sector industries.

In private sector companies, the employer, as well as the employees, get paid solely on the basis of the output of their work. The same cannot be said for government sector companies. Because of the absence of a concession like this in the government sector companies, privatization brings increases the efficiency of the company.

2. Political Interference:

Because the public sector industries are managed by the government, political interference is bound to take place.

In the case of political interference, the public sector companies tend to make decisions under pressure from the party in power.

Such a decision might or might not be economically beneficial to the company as well as its employees.

Private-sector industries avoid working under the parties in power and do not encourage any political influence.

3. Long term Goals:

Since public sector companies have huge political influence on them, their goals are short term.

This is because the parties in power are more concerned about the upcoming elections and interested in acquiring the votes.

Private companies are more focused and have long term goals to meet. Hence, they are more concerned about setting the company on the right path.

4. Competition in the market:

When more and more private sector companies are present in the market, the competition grows.

With growing competition, the consumers find themselves with a lot of options to choose from.

When private companies in the market are engaged in healthy competition, the economy is bound to grow and become efficient.