Disinvestment in LIC

Introduction:

In India, one of the Life Insurance Policy is acting under a special statue called Life Insurance Corporation Act, 1956. In 2015, Life Insurance Corporation achieved India-s-most-trusted-award and many other awards.[1] Mission and objectives of Life Insurance Corporation are to give maximize interest to the policyholder for economic development. LIC gives various plans which can even easily subscribe by the rural backward class for economic development. According to the Life Insurance Corporation Act, 1956, the Central Government is the sole authority, who manages the whole stake of the LIC. But according to the recent budget news of 2020, the central government offers to the public for sale LIC stake, not more than 10%. According to the government’s budget plan, the government wants to disinvestment on the LIC to improve the economic flow.

What is disinvestment?

According to the SEBI (Securities and Exchange Board of India) guidelines, disinvestment means state Government or Central Government to give the share for an initial public offer for smooth economic flow. Through the process of disinvestment, the Government is trying to bring a good environment for the corporation as well as a competitive market which led to the development of the economic conditions.

Stated purposes of disinvestment in LIC

According to the Finance Minister Nirmala Sitharaman, the disinvestment of LIC through the IPO will bring more financial discipline and more favorable change for all the economic conditions of the people.  Through IPO disinvestment of LIC will increase the revenue which will help to improve the social conditions. So, the main achievement from this disinvestment of LIC through the IPO is to bring the smooth function of the capital market and economic development[2].

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Public reaction

In most of the places, LIC employees protested for the offering of privatization against the Government. They protested on the way of one-hour walking and said that it is not the way to make the economics flow[3]. LIC not only a profitable sector but also a welfare sector for all the needy people. The protester said that they will bring more stock in the market with the new schemes for the smooth functioning of economic flow[4].

What is IPO?

IPO means” Initial Public Offering”.  IPO was a process of offering where one private company can sell the stock to the public, and it will bring more equity capital.  IPO is one of the ways to gain the necessary capital for the market[5].

Conclusion:

Life Insurance Corporation of India (LIC) through an initial public offering (IPO) will be created the market for capitalization. The selling of stock will help to achieve the disinvestment target. IPO of LIC will bring the globalization through the foreign investors. Not only improvement but also it creates the fear of the mind of the people that privatization might affect their interest in profit. On one, side the IPO of LIC might bring the evolutionary changes, but on another side, it may bring sadness for the whole country.

[1] http://www.licindia.in/Media/Awards-Archive

[2] https://www.freepressjournal.in/business/budget-2020-government-to-sell-stake-in-lic-via-ipo-as-part-of-disinvestment-initiative

[3] https://economictimes.indiatimes.com/markets/stocks/news/lic-staff-protest-move-to-sell-stake/articleshow/73949326.cms

[4] https://www.thehindu.com/news/national/andhra-pradesh/lic-employees-protest-privatisation-move/article30716470.ece

[5] https://economictimes.indiatimes.com/definition/IPO

Author: Sonali Gorai,
Adamas University/ 3rd Year/ Perusing BALLB(H)

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