New Economic

Embed Size (px)

Citation preview

  • 8/2/2019 New Economic

    1/20

    NEW ECONOMIC POLICIES

  • 8/2/2019 New Economic

    2/20

    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.

  • 8/2/2019 New Economic

    3/20

    CONCEPT OF

    LIBERALISATION

    Liberalisation means withdrawal of

    various restrictions on industrial and

    business firms in terms of investment,

    production, production, import and export.

  • 8/2/2019 New Economic

    4/20

    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.

  • 8/2/2019 New Economic

    5/20

    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

  • 8/2/2019 New Economic

    6/20

    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.

  • 8/2/2019 New Economic

    7/20

    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.

  • 8/2/2019 New Economic

    8/20

    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.

  • 8/2/2019 New Economic

    9/20

    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.

  • 8/2/2019 New Economic

    10/20

    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.

  • 8/2/2019 New Economic

    11/20

    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.

  • 8/2/2019 New Economic

    12/20

    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.

  • 8/2/2019 New Economic

    13/20

    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.

  • 8/2/2019 New Economic

    14/20

    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.

  • 8/2/2019 New Economic

    15/20

    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.

  • 8/2/2019 New Economic

    16/20

    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.

  • 8/2/2019 New Economic

    17/20

    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.

  • 8/2/2019 New Economic

    18/20

    Number of reserved products for public sector

    was reduced .

    Government stopped financial assistance to publicsector enterprises.

    The Government followed disinvestments program

    for privatisation.

  • 8/2/2019 New Economic

    19/20

    POSITIVE EFFECT :

    Better service to customers.

    Control on wastages.

    Better efficiency and performance.

    Human touch in customers services.

    Control in loss.

  • 8/2/2019 New Economic

    20/20

    NEGATIVEEFFECTS :

    Profit making motive.

    Problem of unemployment.

    Fear of foreign direct investment.

    Problem of underutilisation of the capacity.