LIBERALISATION PRIVATISATIONGLOBALISATION

INTRODUCTION

July 1991,India has taken a series of measures to structure the economy and improve the BOP position. The new economic policy introduced changes in several areas.

The policies are: -

1.Liberlisation

2.Privatization

3.Globalisation

Which are known as “ LPG ”. (liberalization privatization globalization)

Reasons for implementing LPG :

Excess of consumption and expenditure over revenue

For protection to Indian industries.

Mismanagement of the firm in the economy.

Increase in losses for public sector enterprises.

Various distortion like poor technological development, shortage of foreign exchange

Low foreign exchange reserves.

Inflation

LIBERALIZATION Liberalization refers that limited

government regulations and restrictions in the economy in exchange for more participation of private firms.

Measures taken for liberalization• Liberalization for industrial licensing

• Freedom for expansion and production to industries

• Increase in the investment limit of the small industries

• Freedom to import the capital goods and raw material

• Freedom to import technology

• Liberalization of export and import transactions

• Liberalization in taxation policy

• Liberalization in banking sector

ADVANTAGE Increase the foreign investment.

Increase the foreign exchange reserve. Increase in consumption and Control over price. Competition promotes efficiency, so resources are wasted much

less

Liberalization removes government regulations on the economy, which

promotes jobs, lower prices, higher incomes and lowers inflation.

DISADVANTAGE

• Increase in unemployment.

• Loss to domestic units.

• Increase dependence on foreign nations

• Unbalanced development

PRIVATIZATION Privatization means transfer of ownership of an

enterprise from the public sector to the private sector .

In privatization most of the role has play by private sector.

ADVANTAGE Privatization helps to reduce the burden on Govt.

It will help profit making public sector unit & modernize their

business.

It will help in making public sector unit more competitive.

It will help to improving the quality of decision making,

because the decisions are free from any political interference.

It Encourage the new innovations without any restrictions.

Small Industries can grow more and more.

DISADVANTAGE• Lack of welfare.

• Increase in inequality

• Problem of financing.

• Problem in unemployment.

• Ignores the weaker sections & national importance

GLOBALIZATION Globalization means integration of the

economy of the country with the rest of the world economy and opening up of the economy for foreign direct investment by liberalizing the rules and regulations and by creating favorable socio-economic and political climate for global business.

ADVANTAGE Increase in Trade in Goods and Services Free flow of technology Increase in industrialization Increase in production and higher standard

of living. Commodities at lower price with high

quality Increase in jobs and incomes Development of infrastructure

DISADVANTAGELoss of domestic

industriesDecline in incomeo Transfer of natural

resourcesWidening gap between

rich and poor

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