Statement: The government has decided to disinvest large chunk of its equity in select public sector undertakings for a better fiscal management. Assumptions: The amount generated out of the disinvestment process may reduce substantially the mounting fiscal deficits. There will be enough demand in the market for the shares of these undertakings.

Given data

• Statement: Government will disinvest a large chunk of equity in select PSUs for better fiscal management.
• Assumption I: Disinvestment proceeds may substantially reduce fiscal deficits.
• Assumption II: There will be enough market demand for those shares.

Concept/Approach

A policy decision aimed at 'better fiscal management' assumes both that it raises funds and that the market can absorb the sale.

Step-by-step reasoningIf proceeds did not help deficits, the fiscal-management rationale would fail ⇒ I is necessary.If demand were insufficient, the plan could not be executed effectively ⇒ II is necessary.

Verification/Alternative

Both assumptions are pre-conditions: one financial (impact on deficit) and one operational (market demand).

Common pitfalls

• Assuming only one precondition (funds) without feasibility (demand).

Final AnswerBoth I and II are implicit.