For SOL students Impact of liberalisation, privation on India

• The term “Liberalization” stands for “the act of making less strict”.Liberalization in Economy stands for “The process of making policies less constraining of economic activity." And also “Reduction of tariffs and/or removal of non-tariff barriers.”Economic liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities; the doctrine is associated with neo-liberalism. The arguments for economic liberalization include greater efficiency and effectiveness that would translate to a "bigger pie" for everybody.
• In developing countries, economic liberalization refers more to liberalization or further "opening up" of their respective economies to foreign capital and investments. Three of the fastest growing developing economies today; Brazil, China and India, have achieved rapid economic growth in the past several years or decades after they have "liberalized" their economies to foreign capital. Most first world countries, in order to remain globally competitive, have pursued the path of economic liberalization: partial or full privatization of government institutions and assets, greater labor-market flexibility, lower tax rates for businesses, less restriction on both domestic and foreign capital, open markets, etc.
• The major elements of Liberalisation in India includes the followings :
  1. De-licencing of industries :-
     The Industrial Policy 1991 abolished (cancelled), licencing for most industries which helped Indian companies to concentrate on productive activities.
  The 6 industries that required licencing are alcohol, cigarattes, industrial explosives, defence product, drugs & pharmaceuticals, hazardous chemicals, etc.

  2. Liberalisation of foreign investment :-
     The necessity to obtain approval for foreign investment from various government authority often caused delayed. At present FDI is 100 % in certain sectors such as infrastructure, exports, hotels, tourism, etc. The Liberalisation of FDI has resulted in certain benefits such as increased in inflow of foreign capital, Development of skills of Indian personnels due to foreign MNCs training transfer of technology by foreign partners to Indian firms.

  3. Liberalisation of foreign technology imports :-
     The liberalized import of foreign technology led to technological improvement in Indian industries. This helped in getting automatic permision for foreign technology imports and no permision was required for hiring foreign technitians & foreign technology testing.

  4. Liberalisation of industrial location :-
     The Industrial Policy 1991 stated that, there is no need to obtain approval from central government for industrial location. This enabled the Indian firms to set up industries at a right location of their choise without much interference from government authority.

  5. Liberal taxation :-
     The government of India has introduced liberal reduction in taxation rates on direct tax & indirect tax, customs, excise, service which has greatly benefited the firms operating in India.

  Advantages of Liberalisation :-
  1. Increase in foreign investment.
  2. Increase in efficiency of domestic firms.
  3. Rise in the rate of economic growth.
  4. Control of price.

  
  

  
  

  Disadvantages of Liberalisation :-
  1. Increase in unemployment.
  2. Loss to domestic unit.
  3. Increased dependence on foreign nation.
  4. Unbalanced development of sectors.

Concept of Privatisation :-
   Privatisation is the transfer of control of ownership from public sector to private sectors.
It means the conversion of property rights from the public to private owners.
   The two elements of Privatisation are as follows :
1. Dereservation of public sectors :-
   The dereservation of public sectors has enabled the entry of private sectors in those industries which were reserve only for public sectors. This has led to improve customers service & efficiency of the firms. At present, 3 industries has reserved for public sector are Railways, Automic energy, & Specified minirals.

2. Dis-investment of Public sector :-
   Dis-investment is a process of selling government equity in PSUs (Public Sector Undertaking) to private parties. The disinvestment is undertaken to achieve good customers service, overcome polotical interference, overcome curruption in PSUs, improve efficiency of PSUs.

Advantages of Privatisation :-
1. Helps in reducing the burden on government.
2. Makes the PSUs competative.
3. Greater automomy for PSUs managers.
4. Industrial growth.
5. Better service to customers.

Disadvantages of Privatisation :-
1. Encourages the growth of monopoly power.
2. Privatisation may be prefer only for profit making PSUs.
3. Unbalance development of industries.
4. Compromise of social justice & public welfare.
5. Increased in corruption.

   The main elements of Globalisation includes the followings :
1. Introduction of Foreign Exchange Management Act, 1999 (FEMA) :-
     The government of India introduced FEMA 1999 to make foreign exchange transactions easier such as obtaining of funds by Indian companies from abroad, overseas investment by Indian firms, holding of properties in India by NRIs, holding of properties by India nationals abroad.

2. Reduction in custom duties :-
    The government of India reduced the custom duties. The reduction in import duties has resulted in cheaper import into India.

3. Liberalisation of foreign investment :-
    The government of India has liberalised foreign investment which in turns has given a good boost to Indian capital market.

4. Signing of WTO Agreement :-
    India has signed a number of agreement in order to expand Indian trade worldwide. Some of the agreement includes TRIPS (Trade Related Intellectual Property Rights), GATS (General Agreement on Trade in Service).

Advantages of Globalisation :-
1. Free flow of foreign capital.
2. Free flow of new technology & production method.
3. Increased in Industrialization.
4. Increased in employment & income.
5. Benefits for consumers.

Disadvantages of Globalisation :-
1. Loss of domestic industries.
2. Unemployment.
3. Increasing inequalities between rich & poor.
4. Cultural problems.
5. New type of political & commercial colonization.