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In India, disinvestment policies have become an important part of economic reforms meant to improve the accountability, efficiency, and competitiveness of Public Sector Undertakings (PSUs). Disinvestment is the process of selling government shares in PSUs to the public or private sector. It was first implemented in the early 1990s as part of the liberalization program. The main goals are to lessen the financial load, enhance public finances, promote greater ownership, and develop a more vibrant, market-driven economy. Strategic disinvestment and the privatization of non-performing or non-strategic PSUs have replaced partial stake sales as India's disinvestment approach over the years. Although the government has benefited greatly from disinvestment in non-tax revenue, it has also triggered discussions about valuation, transparency, social impact, and the role of the state in the economy. The government's commitment to streamlining the public sector is demonstrated by important efforts such as the establishment of the Department of Investment and Public Asset Management (DIPAM) and policies on strategic disinvestment. With an emphasis on how it affects PSU performance, this article examines the idea, goals, significance, implementation problems, difficulties and ramifications of India's disinvestment strategy. This article also looks at the main problems that PSUs are facing today and examines the recent challenges in a fiercely competitive privatized economy.