Marketing Management

Module-1
Lesson#7
Marketing in the Indian Economy
Implications of Liberalization
 Marketing in the Indian economy

Since 1991 India has been going through a process

of economic reforms and liberalization. These reforms aim at

modernization of the country’s industrial system,

removal of unproductive controls,
strengthening of private investment, including
foreign investment, and
integration of India’s economy with the global
economy.
In short, all round opening up of the country’s economy has
been the essence of the reforms.
 Marketing in the Indian economy

The reforms can be classified into two

broad categories:

• Liberalization measures

• Macroeconomic reforms and structural

adjustments
 Marketing in the Indian economy

The first part of liberalization is the New Industrial Policy whose main
components are:
De-licensing
De-control
Liberalization of industrial licensing De-regulation
Broadbanding
Abolition of registration
FERA Liberalization Liberalization of foreign investment
Liberalization of technology import

MRTP liberalization Abolition of threshold assets limit

No MRTP clearance needed for
expansions, mergers.

Several industries hitherto reserved for

public sector opened up to private
sector
Curtailment of Public Sector Only eight core industries remain
Reserved for the public sector.
Purview of BIFR extended to the public
sector
 Marketing in the Indian economy
-Macroeconomic Reforms
Fiscal/Monetary reforms -
Reduction of fiscal deficits.
Reforms of tax systems
Interest rate reforms
Inflation control
Banking reforms -
Banks to operate as commercial institutions
Phasing out priority sector lending
Deregulation of deposit interest rates
Operational freedom in lending rates
Adherance to norms on capital adequacy,
Income recognition and provision for bad debts.
Disinvestment in public sector banks
Permission for new private sector banks
 Marketing in the Indian economy
- Macroeconomic Reforms (contd.)
Capital Market Reforms
Abolition of CCI and introduction of free pricing
Strengthening of SEBI
Opening up of Indian capital markets to FIIs.
Allowing foreign brokerages in Indian capital markets.
Allowing private sector into mutual funds
Allowing Indian NBFCs to align with global finance cos
Allowing Indian firms to raise capital abroad.
 Marketing in the Indian economy
- Structural Adjustments
Market-driven price -
Phasing out of subsidies.
Dismantling of price-controls
Axe on fertilizer subsidy
Abolition of sugar subsidy
Axe on petro-product subsidy
Partial decontrol & parallel marketing of
kerosene & LPG
Abolition of export subsidy
Steel price decontrol
 Marketing in the Indian economy
- Structural Adjustments (contd.)
Public Sector Restructuring
No new PSUs; no expansion of PSUs with govt. equity
Budgetary support for PSUs to be phased out
Preference to PSUs in govt. tenders abolished
Disinvestment of govt. equity in PSUs Sick
PSUs to be referred to BIFR

Exit Policy
Support to VRS
Creation of NRF
Implications of Liberalization measures:

Sea-change in the industrial, business and

marketing environment.
1.Entrepreneurial freedom vitalizes the
industrial scene:
Rush of entrepreneurs
Spate of mergers/acquisitions/takeovers;

Corporates enhance size and energy.

Implications of Liberalization measures:

2. FDI goes up and influences investment

pattern in industries
3. Ascendancy of multinationals in the
Indian markets
MNCs acquire majority equity in their
Indian enterprises and JVs
Many MNCs enter India anew
MNCs become big players even in core
industries
Implications of Liberalization measures:

4. Banking Sector comes under competitive

environment
Competitive existence foisted by deregulation.
Onslaught from New Private Sector Banks with superior
Technology and aggressive marketing

Capital markets, FIs, MFs and NBFCs compete with banks

Public sector banks in particular come under severe

pressure;They are compelled to operate as viable,
commercial Institutions.
Implications of Liberalization measures:

5.Insurance sector too experiences

competition, with new private players:

Constituted IRDA

IRDA issues licenses/in-principle

clearance to several private players
and many of them start operations.
 Implications of Liberalization measures:
6.Capital markets undergo radical change:

FIIs enter Indian capital markets in a big way

Foreign brokerages closely follow the FIIs
NBFCs register growth and form alliances with global finance
Companies.
Growth of private mutual funds.
Indian firms raise capital globally and form alliances with
global Finance firms
India’s capital markets get integrated with global capital
markets
Implications of Liberalization measures:

7.Financial services emerge as a major

business:
Emergence of many new financial services
and financial service companies.
Business firms spot financial services as a
business
and float financial service companies of
their own.
Implications of Liberalization measures:

8.Private sector becomes the dominant

component of the economy.
Even in core/infrastructure areas, sector after
sector, opened up to Private enterprise;

Oil, mining, telecom, road construction,

Railways, ports, civil aviation,
EPZ/SPZ, defense Production
– all now open to the private sector.