Liberalization, Privatisation and Globalisation

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(a) Liberalisation: Through this liberalisation process, Indian Economy has opened up and started interacting with the world in a big way.

It includes:

  • Abolishing industrial licensing requirement in most of the industries

  • Freedom in deciding the scale of business activities

  • Freedom in fixing prices of goods and services

  • Simplifying the procedure for imports and exports

  • Reduction in tax rates

  • Simplified policies to attract foreign capital and technology to India

(b) Privatisation: Because of the policy reforms announced in 1991, the expansion of public sector has literally come to a halt and the private sector registered fast growth in the post-liberalised period.

Issues of privatisation include:

  • Reduction in the number of industries reserved for the public sector from 17 to 8 (reduced further to 3 later on)

  • Introduction of selective competition in the reserved area.

  • Disinvestment of shares of selected public sector industrial enterprises in order to raise resources.

  • To encourage wider participation of general public and workers in the ownership in business

  • Improvement in performance through an MOU system by which managements are to be granted greater autonomy but held accountable for specified results.

(C) Globalisation:

  • To achieve objectives of globalisation, the government has adopted various measures such as:

    • Reduction in custom duties

    • Removal of quantitative restrictions or quotas on exports and import

    • Facilitating foreign investment

    • Encouragement of foreign technology

  • These measures are expected to achieve:

  • Higher rate of growth

  • Enlargement of ports

  • Facilitating foreign investment

  • Encouragement of foreign technology