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8/2/2019 New Economic
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NEW ECONOMIC POLICIES
8/2/2019 New Economic
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NEW ECONOMIC POLICIES
Under the leadership of Shri. P.V. Narsimha Rao ,in the year of 1991 the congress government introduceda new economic policy to overcome the problems suchas adverse balance of payments position, low level of
foreign exchange reserve, sharp decline in foreign capitalinflow large fiscal deficit, low productivity of pastinvestments and temporary loss of export markets .
The new policy aimed at achieving three majorobjectives of :
1. Liberalisation.
2. Globalisation.
3. Privatisation.
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CONCEPT OF
LIBERALISATION
Liberalisation means withdrawal of
various restrictions on industrial and
business firms in terms of investment,
production, production, import and export.
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Important measures in direction of
liberalisation:
1. Reduction in nominal tariff rates.
2. Narrowing gap between nominal and effective tariff
rates.
3. Real valuation of currency.
4. Adopting uniform exchange rate in place of multiple
exchange rate.
5. Removal of imports and exports duties.
6. The removal of subsidies ,tax rebates .
7. Duty free access to foreign goods and services.
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Policy decisions in favour of
liberalisation
1. Liberal export import policy
2. To bring convertibility of rupee on current account.
3. To bring an end to licensing.4.To offer an opportunity to foreign investors to enter in
Infrastructure and service sectors.
5. Encourage private investment.
6. Allowing foreign equity investment in Indian companies.
7. To adopt policy of foreign exchange transaction.8. Offering incentive plans
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EFFECTS OF LIBERALISATION IN INDIA
Positive effects:
1. FOREX services.
2. Improvement in balance of payments positio.
3. Improvement in the quality of indian product.
Negetive effect:
Adverse effects on:
1.B
alance of trade.2. Small scale industries.
3. Indian agriculture.
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Concept ofConcept of globalisationglobalisation
The expansion and extension of economic activities across
political boundaries of a country is called
g loba l i s a t i on .
A process of increasing economic integration.
A process of free movement of commodities, capital,
entrepreneurs, professionals and workers across national
boundries.
A process of transforming national economies into
global economy.
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Components ofComponents of GlobalisationGlobalisation
Two components as follows:
Globalisation of markets.
Globalisation of production.
As growing independence of countries worldwidethrough increasing:
y Volume and variety of cross border transaction
y International capital flow.
y Rapid and widespread diffusion of technology.
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Characteristics ofCharacteristics of
GlobalisationGlobalisationOperating and planning to expand business.
Indiscriminate policies.
Establishment of manufacturing and distribution
facilities.
Product planning and development.
Fast growth of multinational corporation.
Recovery of resources.
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Essential conditions ofEssential conditions of
globalisationglobalisation
Freedom to business.
Availability of infrasructural facilities and other
resourcesto business firms.
Creation of competitiveness among the firms.
Orientation of business firms.
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GlobalisationGlobalisation in Indiain India
y Process of globalisation was started in India by
integrating our economy with world economy.
y Withdrew of restriction.
y Multinational corporations was allowed.
y Foreign exchange regulation act.
y Adjustment in exchange rate of rupee.
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Step towardsStep towards globalisationglobalisation
inin IIndiandiaa) Delicencing policy (1991).
b) Rupee convertibility.
c) Import liberalisation.
d) Opening up to foreign capital:i. Permission for foreign direct investment.
ii. Equity in other tourist areas.
iii. Cent per cent foreign participation for setting up
power plants in the coutry.
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Effects ofEffects of globalisationglobalisation in Indiain India
Effects on External Sector :
1. Increase in foreign exchange reserves.
2. Improvement in balance payments situation.
3. Success in self-reliance through importsubstitution.
4. Decrease in current account deficit.
5. Decrease in external debt.
6. Control on illegal transactions.
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Effect ofEffect of globalisatonglobalisaton in Indiain India
Effect on Domestic Economy:
1. Competition in Indian industries and multinational
companies.
2. Decline of small scale industries.
3. Increase in unemployment.
4. Rural economy is collapsed.
5. Justice and injustice to certain industries.
6. Increase in inequality in income and wealth.
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Privatisation is the process of participation of
private sector in ownership and management of
public sector.
It is also known as the transformation of public
sector into private sector either fully or partially.
Privatisation is the general process of involvingprivate sector in the ownership or operation of a
state-owned enterprises.
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Following are made in favour of prvatisation:
1. Improvement in efficiency.
2. Easy fixation of responsibility.
3. Maintenance of capital market discipline.
4. Absence of political interference.
5. Success in planning.
6. Immediate response.
7. Measures in private.
8. Privatisation leads to better services to
consumers.
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Arguments made against privatisation are:
1. Wrong season.
2. Executed in wrong season.
3. Lack of transparency.
4. Undertaken only to finance budget deficit.
5. Lack of strong financial strategy.
6. Lack of realistic labour strategy.
7. Lack of political consensus.
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Number of reserved products for public sector
was reduced .
Government stopped financial assistance to publicsector enterprises.
The Government followed disinvestments program
for privatisation.
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POSITIVE EFFECT :
Better service to customers.
Control on wastages.
Better efficiency and performance.
Human touch in customers services.
Control in loss.
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NEGATIVEEFFECTS :
Profit making motive.
Problem of unemployment.
Fear of foreign direct investment.
Problem of underutilisation of the capacity.