Liberalisation, Privatisation and Globalization
After independence we were giving public sector a major role in the overall development of the economy. We had taken a ‘ u ‘ turn from these policies in 1991 which promoted public sector. The immediate reason was that we were not having foreign exchange for imports for even 15 days .For eradication of crises we approached world bank and IMF
Reasons-:
Growth rates were not as high as expected.
Fiscal deficit was very high in the tune of 5.4% of GDP.
Inflation rates were in double digit.
Corruption was rampant.
Growth of Employment generation was less than 1%.
Suggestions:-
· Stabilisation measures :-maintain sufficient foreign exchange reserve and keep the rising prices under control
· Structural measures:-Introduce Liberalisation and privatization.
LIBERALISATION
· Removal of restrictions which were governing private sector.
· And allowing private sector to produce in those areas which was earlier prohibited.
Deregulation of industrial sector:-
· Abolition of licensing.
· Private sector was allowed in many industries.
· Earlier many goods were reserved for small scale industries now it has been de- reserved.
· Now market is allowed to determine prices.
FINANCIAL SECTOR REFORM
Financial sector is controlled through various rules and regulation of RBI. The major aim of this reform is to reduce the role of RBI from regulator to facilitator. Financial sector is allowed to take decisions on many matters without consulting RBI.
TAX REFORM
Tax reforms are concerned with fiscal policy. There are two types of taxes:
Direct tax and indirect tax
DIRECT TAX:
The taxes on individual’s income as well as on the profits earned by the business enterprise.
The effect of whose cannot be shifted to other.
INDIRECT TAX
The effect of whose can be shifted to other.
FOREIGN EXCHANGE REFORM
It includes devaluation of Indian rupee in foreign markets so as our goods become cheaper in foreign market and Our Export may increase and imports may fall.
TRADE AND INVESTMENT POLICY REFORM
This policy aims at:
· Removal of quantitative restrictions on imports as well as on exports
· Reduction of tariff rates
· Removal of licensing procedure for imports
· Import licensing was abolished
· Export duties have been removed to increase competition
PRIVATISATION
Converting public companies into private companies by Withdrawal of government ownership or management
or
Outright sale of government companies
DISIVESTMENT
Privatisation of public sector undertaking by selling off part of the equity of PSUs to public
GLOBALISATION
It means integration of the economy of country with world’s economy.
OUTSOURCING
When work is done outside the country due to low wage rate, reasonable degree of skill and accuracy, it is known as outsourcing.
WORLD TRADE ORGANISATION {WTO}
The organization administers all multilateral trade agreements by providing equal opportunities to all countries in the market for trading purpose. The share of India in world trade is 0.5 to 0.7%
Effect of these reforms on :
(a) AGRICULTURE
The growth rate of agriculture has been decelerating.
Reasons
· Public investment in infrastructure became low.
· Removal of fertilizer subsidy has led to increase in the cost of production.
· Removal of MSP and lifting of quantitative restriction have adversely affected farmers as they have to face increased international competition.
(b) INDUSTRY:
· It has decrease the demand of industrial products because of cheaper imports, in adequate investment in infrastructure.
· Domestic manufacturers are facing competition from imports.
· Free movement of goods and services adversely affected the local industries and employment opportunities.
