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PRIVATISATION
LIBERALISATIO GLOBALISATIO
N N
ECONOMIC
REFORMS
Liberalisation:
Free from direct or physical control
by the government in the way of trade
is known as liberalisation.
Before 1991 the were some controls
of Govt. they are:
Industrial licensing system was a rigid
process.
They were controlling the price.
Import licensing.
Restrictions on investment.
Economic reforms under Liberalization:
There were four reforms under
liberalization:
Industrial reforms
Financial reforms
Fiscal reforms
External reforms
Industrial reforms:
Abolition of licensing except some products
like cigar etc.
Contradiction to public sector i.e. number of
items produced by public sector were
reduced.
Govt. given freedom to import capital.
Dereservation of production units.
Producer’s given freedom to what to produce
& how much to produce.
Financial reforms:
R.B.I was turned into felicilitator.
Due to this dramatically change the
banking sector of the country had
expanded a lot.
It also allowed Foreign Institutional
Investors(FII) to invest money in Indian
market.
Fiscal reforms:
It relates to total revenue and total
expenditure of government.
Before liberalisation, the taxes were
very high & this encouraged tax evasion
by the people.
After Liberalisation, taxes were
reduced.
The procedure for paying taxes was
simplified.
Non-planned expenditure by the Govt.
was reduced
External reforms:
Foreign exchange reserves:
In 1991, Devaluation of rupee so by this
foreign countries can buy Indian good.
This provided good flow of trade.
At presently, exchange rate is determined
by supply & demand in international market.
Foreign trade policy:
Abolition of import licensing except for some
cases.
Quantitative restrictions were removed.
Tariff restrictions were moderated.
Export duties has withdrawn.
Advantages of liberalization
Industrial licensing
Increase the foreign investment.
Increase the foreign exchange
reserve.
Increase in consumption and Control
over price.
Check on corruption.
Reduction in dependence on external
commercial borrowings
16
Disadvantages of Liberalization
Increase in unemployment.
Loss to domestic units.
Increase dependence on foreign
nations
Unbalanced development
17
Privatisation:
Privatisation is defined as the
transfer of function, activity or
organization from the public
sector to private sector.
Two ways for Privatisation:
1) Sale of public sector units to
private sector.
2) With drawl of public sector
units-joint.
Objectives ofPrivatisation
To increase efficiency & competitive
power of the enterprises
To strengthen industrial
management.
To earn more & more Foreign
currency.
To make optimum use of resources
To achieve rapid industrial
development of the country.
Mesures Adopted For Privatisation
Contraction of Public sector
Disinvestment
Sale of shares of public enterprises
Increase in private sector
Conversion of loans into shares is
not necessary
Sick industries
Memorandum of understanding
Advantages of Privatisation:
Industrial sickness.
Lack of welfare.
Class struggle.
Increase in inequality
Opposition by employees.
Problem of financing.
Increase in unemployment.
Ignores the weaker sections.
Ignores the national importance
Public sector reforms
The reforms introduced to support
public sector units are:
Introduction of some awards like:
Navaratnas
E.g: BPCL,MTNL,Etc.
Maharatnas
E.g: CIL, ONGC, Etc.
Miniratnas
E.g: BSNL, ITDCL, Etc.
World Trade Organization: